An empirical test was carried out in 1951 on Heckscher Ohlin model to find out whether or not the US, which has abundant capital resources, exports capital intensive goods and imports labour intensive goods. But, it was found that the US exported more labour -intensive commodities and imported more capital intensive products, which was contrary to the result of Heckscher - Ohlin model. Who has conducted the test?
Heckscher-Ohlin Model: Empirical Test Findings
The Heckscher-Ohlin (H-O) model theorizes that countries export goods using abundant factors of production and import goods using scarce factors.
An empirical test was conducted in 1951 using US trade data. The expectation, based on the H-O model, was that the capital-abundant US would export capital-intensive goods.
However, the test results showed the opposite: the US exported predominantly labor-intensive commodities and imported capital-intensive ones. This contradicted the H-O model's prediction.
Identifying the Researcher
This specific empirical test and the resulting contradiction are famously associated with economist Wassily Leontief.
The anomaly discovered became known as the Leontief Paradox.
Important Questions from Theories of international trade
The following statements relate to transnationality. Choose the correct code for the statements being correct or incorrect.
Statement I: The UNCTAD developed an index to compare the transnationality of countries in which TNCs operate.
Statement II: The UNCTAD followed parameters like FDI flow as a percentage of gross fixed capital formation, FDI inward stock, value added by foreign affiliates and jobs created by them.
Heckscher-Ohlin Theory of factor endowment suggests which of the following types of relationships?
(A) Production — Marketing relationship
(B) Land — Labour relationship
(C) Marketing — Capital relationships
(D) Labour — Capital relationships
(E) Technological complexities
Choose the correct answer from the options given below:
According to the Heckscher-Ohlin theory, which one of the following statements is correct?
Given below are two statements:
Statement I: Translation exposure refers to the exchange gain or loss occurring from the difference in the exchange rate at the beginning and the end of the accounting period.
Statement II: Transaction exposure refers to the change in the value of the firm caused by the unexpected changes in the exchange rate.
In the light of the above statements, choose the most appropriate answer from the options given below:
Match List I with List II
LIST I (Theory) LIST II (What Nation's do) A. Mercantilism I. The range of products made or grown for export would depend upon the relative availability of different factors in each country. B. Theory of Absolute Advantage II. Gold and silver are the mainstay of national wealth C. Theory of Comparative Advantage III. Countries should specialize in the production of goods for which they have absolute advantage D. Factor Endowment IV. Nations should produce those goods for which they have the greatest relative advantage Choose the correct answer from the options given below:
