Difference between International Trade Prices and Autarky Prices.
In their JPE article, Bernhofen and Brown use the change in prices in Japan from the early 1850s to 1869 to measure the difference between international trade prices and autarky prices. What is the main finding in Figure 4? In what sense is this a test of the law of comparative advantage?(Note: I found the paragraph after the proof on page 53 to be helpful).According to the article, why do the authors think it is OK to use 1850s prices to measure what autarky prices would have been in 1869 (in particular, why do they think Assumption 4 in Section 3 is reasonable)?What was something you didnt understand in the reading for this week?