Changes in Factor Input Coefficients and The Leontief Paradox
1984 marks the 30’tieth anniversary of probably one of the most controversial input-output analysis, and of one of the most persistent paradoxes in economic theory. The analysis referred to is the one carried out by Leontief in his 1954 article “Domestic Production and Foreign Trade; the American Capital Position Re-examined”1, an analysis that presented America as a net exporter of labour services, and a net importer of capital services. Since the Hecksher-Ohlin theory — at least at that time the predominant trade theory — holds that the comparative advantage of individual goods increases monotonously when they are ranked according to their intensity in the relatively cheap factor, and since the American wage interest ratio was generally agreed not to be surpassed by any of her trading partners, such results were paradoxical indeed.
KeywordsDomestic Production Labour Intensity Industry Output Import Penetration Factor Income
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