Heckscher-Ohlin Trade Flows: A Re-appraisal
Ronald W. Jones
Abstract
The famous Leontief paradox compared the factor proportions used in a countryís export sectors with those used in that countryís import-competing sectors in order to conclude whether a country was relatively capital abundant (in a two-factor, labor and capital setting). When examined in a two-factor, many commodity setting, this procedure reveals the troubling conclusion that as a countryís relative capital endowment rises, its export sector relative to its import-competing sector cycles from being labor-intensive to being capital-intensive, to being labor-intensive, etc., which serves to invalidate the Leontief procedure.
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