LeontiefParadoxon

The Leontief Paradox refers to an empirical finding by economist Wassily Leontief in 1953 that contradicted the predictions of the Heckscher-Ohlin theory of international trade. The Heckscher-Ohlin theory posits that countries export goods that make intensive use of their abundant factors of production and import goods that make intensive use of their scarce factors of production. In the context of the United States, which was widely considered to be a capital-abundant country in the post-World War II era, the theory predicted that the U.S. would export capital-intensive goods and import labor-intensive goods.

However, Leontief's analysis of U.S. trade data for 1947 revealed the opposite. He found that U.S. exports were less capital-intensive than U.S. imports. This unexpected result, known as the Leontief Paradox, suggested that the Heckscher-Ohlin theory, in its simplest form, might not fully explain international trade patterns.

Numerous explanations have been proposed for the Leontief Paradox. One possibility is that the U.S. had an abundance of highly skilled labor, which is a type of human capital, and that U.S. exports were intensive in this skilled labor rather than physical capital. Another explanation is that the U.S. may have had a comparative advantage in industries with relatively low capital-labor ratios due to factors not captured by simple capital and labor measurements, such as technological innovation or economies of scale. Trade barriers and differences in production techniques across countries have also been cited as potential contributing factors. The Leontief Paradox stimulated significant research into the determinants of international trade and led to refinements and extensions of trade theories.