Leontief Paradox : The Wassily Paradox

964 WordsApr 28, 20164 Pages
Theresa Fleckenstein International Economics Dr. Morrison 4/29/16 Leontief Paradox The Leontief Paradox is the finding of Wassily W. Leontief and was an attempt to test the Heckscher-Ohlin theory. The Heckscher-Ohlin Model was developed by two economists by the names of Eli Heckscher and Bertil Ohlin. The Heckscher-Ohlin Model is an economic theory that states that countries export what they can most easily and abundantly produce. This model is used to evaluate an international trade, specifically trade equilibriums between countries that may have different features. The model emphasizes how countries with comparative advantages should export goods that require factors of production that they have in abundance while importing goods that it cannot produce as efficiently. The Leontief Paradox states that U.S imports embodied a higher ratio of capital to labor than U.S. exports. It is the concept that countries with a great deal of capital available import capital-intensive commodities and export labor-intensive commodities. This contradicts what one would expect: countries export according to their competitive advantages (capital intensive countries would import labor-intensive products and export capital intensive products). This was surprising because it was thought that the U.S. was capital abundant, and the Heckscher-Ohlin Theorem would then predict that U.S. exports would be relatively capital intensive. The Leontief paradox led to rejection or revision of the

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