Leontief Paradox Assignment Help

Assignment Help: >> Empirical testing of comparative cost - Leontief Paradox

Leontief Paradox:

Leontief  in  his 1953 study  found  that  despite the  fact  that the USA was a  capital-abundant country it was exporting importantly labour-intensive products, which  is an outcome contrary  to the predictions  of  the H-0  theorem. This came  out in the observation that the exports  of USA were found to be less capital-intensive than USA's  imports even when USA ranks high among the countries  with  high  capital-labour ratios.  This  depicts the  situation  of factor-intensity  reversal.

However, it was argued that the Leontief Paradox was not actually a paradox and the profile of  trade of  the USA was consistent with the propositions of  the H-0  theorem. 'This was argued on the grounds that though USA's  exports are less capital intensive  than imports, but USA exported products that are more skilled labour-intensive  and technological  intensive  than  the  products imported. This  is consistent with the observation that USA is a high-skilled country with a comparative advantage in capital-intensive products.  

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