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Edward Leamer (1980) The Leontief paradox, reconsidered. Journal of Political Economy 88(3): 495-
Leontief’s actual estimates Capital used per million $ of US exports, 1947: $2.55M Labor used per million $ of US exports, 1947: 182K person-years K/L ratio used in export production, 1947: $14.01/person-year Capital used per million $ of US import-equivalents, 1947: $3.09M Labor used per million $ of US import-equivalents, 1947: 170K person-years K/L ratio used in import-equivalent production, 1947: $18.18/person-year
However, given the large US trade surplus in 1947 (exports = $16.7B; imports = $6.2B), the US was a net exporter of K and L services (inputs).
Leamer shows mathematically that in that situation, comparing the capital/labor intensity of exports to that of domestically-consumed production is a better test of revealed factor endowments than comparing exports to imports. In fact, the K/L intensity of US net exports was much greater than the K/L intensity for US production overall – the US was exporting the more K-intensive of the many products it produced.
Robert M. Stern and Keith E. Maskus (1981) Determinants of the structure of U.S. foreign trade, 1956- Journal of International Economics 11: 207-224.
Note the common distinction made among Types of traded goods
“Ricardian goods”
“Heckscher- Ohlin goods”
“product-cycle goods”
Characteristics natural resources
basic manufactures
advanced manufactures
Trade flows depend on:
relative availability
factor proportions
factor proportions, which vary over time w/in a given PLC Advantage measured by
labor productivity
comparative advantage
firm-specific competitive advantage
The Leontief paradox disappeared by 1972, when we consider net exports by industry (in which sectors does the US have the largest net exports), human capital vs. overall labor or overall capital, and non-natural-resource sectors.
“US net exports of manufactures have been making less direct use of unskilled labor… over” the 1958-76 period [213].
“The fact that we do not observe the Leontief paradox in 1972 as compared to 1958 no doubt reflects changes in the composition of trade that occurred in the intervening years, especially the decline in the relative importance of the imports of Ricardian (natural resource) goods” *223+. The US became more focused on human-capital intensive production for export, as it was able to import more labor-intensive H-O-type manufactures from the rest of the world.
international differences in productivity of all factors, based on technology in use – leading some countries to export factor services even when their relative abundance is lower than in some trading partners.
