Wassily Leontief was an economist who won the Nobel Prize for his research on input-output analysis. He is known for discovering the Leontief Paradox, in which his empirical tests of trade theory in 1947 and 1951 found that the US exported more labor-intensive goods and imported more capital-intensive goods, contrary to what economic theory predicted for the highly capital-abundant US economy at the time. Leontief's findings challenged mainstream trade theories and sparked debate around alternative explanations.

1. Leontief Paradox
• Wassily Leontief was a
Russian-American economist
who made several
contributions to the world of
economics.
• Leontief won the Nobel Prize
in 1973 for his research on
input-output analysis.
• Leontief was also credited
with the Leontief Paradox and
the Composite Commodity
Theorem.

2. Leontief Paradox
• First Empirical Test of H-O Theory (1953)
• Used 1947 input output table of the US economy
• Leontief reached a paradoxical conclusion that the
US—the most capital abundant country in the
world by any criterion—exported labor-intensive
commodities and imported capital- intensive
commodities. This result has come to be known as
the Leontief Paradox.

3. H-O Theory Leontief Paradox
AMERICA
Capital Intensive
Export Capital Intensive
Good (IPHONE)
Import Labour Intensive
Good (CLOTH)
AMERICA
Capital Intensive
Export Labour Intensive
Good
Import Capital Intensive
Good

4. Capital and Labor Requirements to produce one
million dollars' worth of the typical exportable and
importable bundles in 1947.
Leontief was surprised to discover that US imports
were 30% more capital-intensive than US exports
Capital
Requirement
Labor
Requirement
Exports aKx = 2.550780 aLx = 182.313 man-
years
Imports
aKm = 3.091339 aLm = 170.114 man-
years

5. Leontief's Second Test
• In 1956 Leontief repeated the test for US
imports and exports which prevailed in 1951.
• In his second study, Leontief aggregated
industries into 192 industries.
• He found that US imports were still more
capital-intensive than US exports. US imports
were 6% more capital-intensive (km = 1.06 kx).

6. Criticism
• 1947 not a typical year
• U.S. labour were more productive
• Low Capital Labour ratio industries
• Only one Country
• Ignored Tariffs

7. Summary of Studies

8. India
America
Nepal
Labour Intensive
Good
Capital Intensive
Good
H-O Theory Leontief Paradox