Leontief paradox

The Leontief paradox is the result of an empirical study, which was published in 1953 by Wassily Leontief and the hitherto undisputed Heckscher- Ohlin theorem ( Faktorproportionentheorem ) completely contradicts. The Leontief paradox triggered a number of empirical studies on the sequence contradiction between empiricism and theory.

Statement of the Heckscher- Ohlin theorem

W. Leontief dealt with the Heckscher- Ohlin theorem ( neoclassical model), which in foreign trade theory was disputed until after the Second World War. According to this theorem, the cause of the direction and extent of foreign trade is the different equipment with production factors in the individual countries. A country that - in comparison to other countries - is richly endowed with a specific production factor is, these are increasingly using. This can namely relatively cheaper than foreign produce. According to the Heckscher- Ohlin theorem is involved in international trade countries will therefore specialize in the export of such goods whose production factor is very strongly present in their own country in relation to other countries. The exported goods are namely vis cheaper.

Leontief's study of the economic structure of the United States

Wassily Leontief's empirical study of the economic structure of the United States led to the published in 1953 concluded that the abundantly equipped at this time with capital U.S. against other countries in international trade products exported, which were produced with a relatively high labor intensity, and import goods that are relatively capital-intensive were produced.

Input -output tables

Used in his empirical investigation Leontief input-output tables and trade statistics from the year 1947 to determine the average capital intensity of exports from the United States. To determine the capital intensity of the related U.S. imports was difficult since Leontief had no available input-output tables of the countries of origin. Therefore, he compared the capital intensity of U.S. exports to the capital intensity of American industries that compete with American imports.

In his publication of 1953, with the 1947 -based values ​​, Leontief came to the following conclusions:

So it turned out that the competitive U.S. imports, an increase of 30 % amount of capital per unit of labor for their production need than exports of the same value (R, column 4).

In sum, the United States exported "work" and imported " capital ". This result, which completely contradicts the hitherto undisputed Heckscher- Ohlin theorem, entered in the Trade Theory as the so-called Leontief paradox.

In another study determined Leontief for the relatively labor- rich and capital- poor Japan has a value of R = 0.644, which is also to be regarded as contrary to the Heckscher- Ohlin theorem, as would have been expected that Japan exported more relatively labor-intensive products. As a result, the Heckscher - Ohlin theorem has been further developed the so-called Neo - Faktorproportionentheorem which distinguishes between labor, human capital and physical capital.

Justification for the Leontief paradox

For the differences between the empirical studies by Wassily Leontief and the Heckscher- Ohlin theorem we have the following reasons:

• The production technologies are not created equal: Differences exist not only in the factor endowments, as there are significant differences in the relative factor productivities.

• The factors of production are not homogeneous: Industrialized countries such as the United States have a relatively good facilities with highly skilled labor. Therefore they export goods in which production relatively much needed by this factor. This led to the neo- factor proportions theory.

• Natural resources are used in addition to the factors labor and capital: Through the use of natural resources, a high proportion is bound to capital. This has the consequence that comparable goods produced are often imported in addition.

• Demand preferences are not equal: The countries that are engaged in international trade, have a different preference demand, for example, the U.S. industry is particularly looking for capital-intensive manufactured goods.

• Depending on the amount of production factor intensities can vary: Here, no clear relationship between relative factor prices and relative goods price is observed.

• Measures of protectionism: During the period of the empirical study of Wassily Leontief changes of customs political action were made in the USA. These included, for example, the protection of productive sectors with relatively high labor intensity.