International trade theory which provides that capital intensive country should export labour-intensive goods and import capital goods is referred to as
Leontief Paradox
The Heckscher-Ohlin theory predicts that a country exports goods that use its abundant factor intensively. A capital-abundant country should therefore export capital-intensive goods and import labour-intensive goods.
Wassily Leontief (1953) tested this with US input-output data. Although the USA was the most capital-abundant country, its exports were found to be more labour-intensive than its import substitutes. This contradiction of the Heckscher-Ohlin prediction is called the Leontief paradox.
Mercantilism held that a nation gains by maximising exports and accumulating gold, and comparative advantage (Ricardo) explains trade by differences in relative labour productivity; neither describes this result.
Hence, Leontief Paradox.
Important Questions from Theories of international trade
- According to Heckscher - ohlin theorem, a nation will export a commodity which is :
- Which one of the following assumptions is the most important assumption in the Heckscher - ohlin theorem of international trade ?
- Who among the following has given Absolute Advantage Model of international trade ?
According to Porter Diamond Model which of the following is NOT a factor of national competitive advantage?
According to the Heckscher-Ohlin theory, which one of the following statements is correct?
