Real Life Examples of the Leontif Paradox

Topics: International trade, Capital intensity, Economics Pages: 4 (693 words) Published: November 30, 2011
|International Marketing Assignment | |Real Life Examples of the Leontief Paradox | |Course Instructor: Dr. Abu Yousuf M Abdullah |

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Contents

Introduction3

The Leontief Paradox3

Paradoxes outside the US4

Introduction

The Heckscher-Ohlin theory states that each country exports the commodity which uses its abundant factor intensively. The HO theory was generally accepted on the basis of casual empiricism. Moreover, there wasn't any technique to test the HO theory until the input-output analysis was invented.

The Leontief Paradox

The first serious attempt to test the theory was made by Professor Wassily W. Leontief in 1954.

Result: Leontief reached a paradoxical conclusion that the US—the most capital abundant country in the world by any criterion—exported labor-intensive commodities and imported capital- intensive commodities. This result has come to be known as the Leontief Paradox. [para = contrary to, dox = opinion]

Leontief took the profession by surprise and stimulated an enormous amount of empirical and theoretical research on the subject.

The US seems to have been endowed with more capital per worker than any other country in the world in 1947. Thus, the HO theory predicts that the US exports would have required more capital per worker than US imports. However, Leontief was surprised to discover that US imports were 30% more capital-intensive than US exports.

In 1956 Leontief repeated the test for US imports and exports which prevailed in 1951. In his second study, Leontief...
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