How International Trade Views Explain the Leontief Paradox

Subject: Economics
Pages: 2
Words: 277
Reading time:
< 1 min

Leontief’s paradox can be explained by the skills-based approach. In particular, in the early fifties, the United States exported labour-intensive goods because the productivity of American workers could be much higher than in other regions of the world, even in Europe. Therefore, American labour-intensive products were more competitive in terms of price or quality. It should be noted that Leontief carried out his research in the early fifties when the effects of World War II were still palpable. Nevertheless, his findings were confirmed by later studies as well. Therefore, the persistence of this trend can be attributed to the higher productivity of American workers. Leontief also focused on this issue while explaining this paradox. It should be noted that before Leontief’s discovery, many economists hypothesized that the United States exported primarily capital-intensive goods. However, his results refuted this assumption.

Additionally, one should discuss the way in which a technology-based view of international trade can explain the Leontief paradox. In particular, it is important to mention that other countries could import capital-intensive products to the United States because foreign companies gained more expertise in the use of technologies and improvement of the manufacturing process. This argument is particularly relevant if one speaks about the automotive and electronic industries of Japan. Much attention should be paid to the R&D activities of such organizations and their quality control strategies. Therefore, the abundance of capital does not necessarily lead to the competitive advantage of a country. Nevertheless, the explanations of Leontief’s paradox should be tested in various countries; otherwise, they cannot be conclusive. This is one of the limitations that should not be overlooked.