The Leontief Paradox

1
The Leontief Paradox

• In 1953 Wassily Leontief published the results
  of the most famous empirical investigations in
  economics, an attempt to test the consistency of
  the H-O Model with the U.S. trade patterns.
• Leontiefs objectives were
• to prove that the H-O Model was correct and
• to show that the U.S. exports were capital
  intensive
• Leontief developed a 1947 input-output table for
  the U.S. to determine the capital-labor ratios
  used in the production of U.S. exports and
  imports. Leontief found that the U.S. exports
  used a capital-labor ratio of 13,991 per man
  year, whereas import substitutes used a ratio of
  18,184 per man year.

2
The Leontief Paradox

• The key ratio of ( KX / LX ) / ( KM / LM )
• (13,991 / 1) / (18,184 / 1) 0.77
• was calculated. Given the presumption that the
  U.S. was relatively capital abundant, that ratio
  was just the reverse of what the H-O Model
  predicted. Thus, it is called the Leontief
  Paradox.