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Leontief paradox


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Wassily Leontief (1906—1999)

human capital

comparative advantage

David Ricardo (1772—1823) political economist

 

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The observation by Wassily Leontief (1906–1999) that in spite of being the world's most capital-rich country, the US appeared on average to have exports that were slightly more labour-intensive than its imports. This was thought to be paradoxical because the Heckscher–Ohlin model of international trade led people to expect that US exports would be capital-intensive and its imports would be labour-intensive. There are two possible explanations for the paradox: first, that the simple Heckscher–Ohlin model ignored the role of natural resources in affecting trade; and second, that because of its large investments in human capital which gave it a highly skilled labour force, the effective US labour supply was much larger than the mere numbers of workers would suggest.

Subjects: Economics.


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