THE LEONTIEF PARADOX THEORY

PRESENTED BY:

ASWADI BIN ISMAIL

NORHASHIMAH BINTI ISMAIL

JUWAIRIAH SHARIF

NUR ASILAH SALIM

(1905~1999)

Russian-American economist notable for his research on how

changes in one economic sector may have an effect on other

sectors

With three of his doctoral students Paul Samuelson, Robert

Solow, Vernon L. Smith

won the Nobel Committee's Nobel Memorial Prize in Economic

Sciences in 1973

to test the Hecksher – Ohlin theoryempirically. In 1954, Leontief found that

the United States the most capital abundant country in

the worldexported labor-intensive goods and imported capital-intensive goods, in contradiction with Hecksher – Ohlin

theory ("H–O theory").the finding that was contrary with the

prediction called paradox

1947, US endowed more capital intensive goods than other country.

HO theory predict that US export would required more capital intensive goods than US import labour intensive

goods

Leontief surprise the world with discovering that US import 30% more capital intensive good than US export

Wassily W. Leontief done 2 test :the first Empirical Test of the HO theory

Leontief's Second Test

1971, Professor Robert Baldwin continue the study with Baldwin's Third Test

Leontief : US more efficient

argued that US workers may be more efficient than foreign

workers

U.S. workers were three times as effective as foreign

workers.

US had special advantage in producing new products or goods

made with innovative technology

Us tend to be highly skilled, able to produce labour intensive

product which required highly skilled labour inputs

OTHER COUNTRY

INVOLVE :

Change their manufacturing plant from

Example:

Cheaper labour than Malaysia

labour intensive

language

skillChange back

POP QUIZare you ready???

Based on the slide, give the full name the inventor of Leontief Paradox Theory?

1

In your words, explain a little bit about Leontief Paradox Theory?

2

The Leontief paradox questioned the validity of the theory of:

a. Comparative advantageb. Factor endowmentsc. Overlapping demandsd. Absolute advantage

3

4

Based on the slide, named 3 country that also been studied by Leontief?

5

The Leontief Paradox states that:

A)the US exports are less capital intensive than US imports.

B)the US exports are more capital intensive than US imports.

C)the US exports are usually in balance with US imports.

D)the US exports are not a factor with US imports.

Thank you.. Bye byee