Abstract
This paper compares the dynamic factor proportions theory to the product cycle theory in explaining Japan's comparative advantage for the 1965-80 period. Three tests were used: (1) domestic Japanese relative prices of more and less competitive export commodities; (2) trends in capital-labour ratios, skill ratios, R&D intensity and product turnover for Japan's manufactured exports; (3) price elasticities over time of Japan's exports. The results suggest that: (1) the product cycle must be considered along with the factor proportions theory for the pre-oil shock period; (2) the product cycle theory is superior for the post-oil shock period.
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