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    Payel Chakraborty
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    Leontief conducted an empirical study using 1947 U.S. input-output data to test predictions of the Heckscher-Ohlin (H-O) trade model, finding that U.S. exports were less capital-intensive than import substitutes, contrary to the model's prediction that the capital-abundant U.S. should export capital-intensive goods; this unexpected result became known as the "Leontief Paradox."

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    Leontief conducted an empirical study using 1947 U.S. input-output data to test predictions of the Heckscher-Ohlin (H-O) trade model, finding that U.S. exports were less capital-intensive than import substitutes, contrary to the model's prediction that the capital-abundant U.S. should export capital-intensive goods; this unexpected result became known as the "Leontief Paradox."

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    Download as PPT, PDF, TXT or read online from Scribd
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    509 views2 pages

    Leontief Paradox.f01

    Uploaded by

    Payel Chakraborty
    Leontief conducted an empirical study using 1947 U.S. input-output data to test predictions of the Heckscher-Ohlin (H-O) trade model, finding that U.S. exports were less capital-intensive than import substitutes, contrary to the model's prediction that the capital-abundant U.S. should export capital-intensive goods; this unexpected result became known as the "Leontief Paradox."

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    The Leontief Paradox

    In 1953 Wassily Leontief published the results of the most famous empirical investigations in economics, an attempt to test the consistency of the H-O Model with the U.S. trade patterns. Leontiefs objectives were: to prove that the H-O Model was correct; and to show that the U.S. exports were capital intensive Leontief developed a 1947 input-output table for the U.S. to determine the capitallabor ratios used in the production of U.S. exports and imports. Leontief found that the U.S. exports used a capital-labor ratio of $13,991 per man year, whereas import substitutes used a ratio of $18,184 per man year.

    The Leontief Paradox


    The key ratio of [( KX / LX ) / ( KM / LM )]

    (13,991 / 1) / (18,184 / 1) = 0.77


    was calculated. Given the presumption that the U.S. was relatively capital abundant, that ratio was just the reverse of what the H-O Model predicted. Thus, it is called the Leontief Paradox.

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