PP504 international trade

1. THE
LEONTIEF
PARADOX
THEORY
PRESENTED BY:
ASWADI BIN ISMAIL
NORHASHIMAH BINTI ISMAIL
JUWAIRIAH SHARIF
NUR ASILAH SALIM

2. (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

3. to test the Hecksher – Ohlin theory
empirically. In 1954, Leontief found that
the United States
the most capital abundant country in
the world
exported 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

4. 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

5. 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

6. OTHER COUNTRY
INVOLVE :

7. Change their
manufacturing plant from
Example:
Cheaper labour than Malaysia
labour intensive

8. language
skill
Change back

9. POP QUIZ
are you ready???

10. Based on the slide, give the full name the inventor of Leontief
Paradox Theory?
1

11. In your words, explain a little bit about Leontief Paradox Theory?
2

12. The Leontief paradox questioned the validity of the theory of:
a. Comparative advantage
b. Factor endowments
c. Overlapping demands
d. Absolute advantage
3

13. 4
Based on the slide, named 3 country that also been studied by
Leontief?

14. 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.

15. Thank
you..
Bye
byee