LEONTIEF PARADOX THEORY OF INTERNATIONAL TRADE PDF

Three positions of bull-leaping sports. Bulls were worshiped by the Phoenicians and Canaanites in Palestine. Water jars. Cretans carried water with these jars to the ritual baths. Life in the Knossos Palace, a restored mural. Wassily Leontief received a Nobel prize in for his contribution to the input-output analysis.

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Wassily Leontief was a Nobel Prize-winning Russian-American economist and professor who contributed several insightful theories to economics. Leontief was born in Germany in and died in New York City in at the age of As an economist, he made several contributions to the science of economics.

Leontief is also credited for his discovery of the Leontief Paradox and the Composite Commodity Theorem. Throughout his professional life, Leontief promoted the use of quantitative data in economics. Leontief campaigned for broader and deeper developments in the area of quantitative data analysis throughout his career.

He was also one of the first economists to employ a computer for quantitative research. Leontief taught at Harvard for 44 years and then New York University afterward. He served as President of the American Economic Association in Smith , and Thomas Schelling Leontief broke down the U. He developed input-output tables for sector analysis that estimated the impact a change in production of a good has on other industries and their inputs—establishing the interdependent relationships of economic sectors.

Analysts can use input-output analysis to estimate the impacts of positive and negative economic shocks by showing the changing demand for inputs when the production of outputs changes. This helps to analyze ripple effects throughout an economy as changes in demand for final goods work their way up the supply chain. Department of Commerce. Leontief also studied trade flows in the s. Based on input-output analysis of international trade discovered that the U.

This is in contrast to prior theories of international trade, which predict that countries will specialize in and export goods that they have a comparative advantage in producing. This means that a capital rich country, such as the U. The Leontief Paradox, as it came to be known, led many economists to question the Heckscher-Ohlin Theorem, which states that countries produce and export what they can create most efficiently, depending on their factors of production.

Moreover, they import goods that they cannot produce as efficiently. Several later economists proposed solutions to this apparent paradox, including the Linder Hypothesis and the Home Market Effect.

The Composite Commodity Theorem was a third major development credited to Leontief, who fathered the concept with John Hicks. This states that if the relative prices of a basket of goods are assumed to be fixed, then they can be treated as a single composite good for the purpose of mathematical modeling. This simplified the equations needed to model price theory. Investopedia uses cookies to provide you with a great user experience.

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Who Was Wassily Leontief? Key Takeaways Wassily Leontief was a Russian-American economist who made several contributions to the world of economics. Leontief won the Nobel Prize in for his research on input-output analysis. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

Related Terms Robert M. Solow Definition Robert M. Input-Output Analysis Input-output analysis refers to the study of the particular effects that different sectors have on the economy as a whole for a particular nation or region. Milton Friedman Definition Milton Friedman was an American economist and statistician best known for his strong belief in free-market capitalism. Theodore W.

Schultz Definition Theodore W. Schultz was an agricultural economist who won the Nobel Prize in Economics in for his research in development economics.

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Wassily Leontief

Wassily Leontief was a Nobel Prize-winning Russian-American economist and professor who contributed several insightful theories to economics. Leontief was born in Germany in and died in New York City in at the age of As an economist, he made several contributions to the science of economics. Leontief is also credited for his discovery of the Leontief Paradox and the Composite Commodity Theorem.

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Leontief Paradox

This econometric find was the result of Wassily W. Leontief 's attempt to test the Heckscher—Ohlin theory "H—O theory" empirically. In , Leontief found that the United States —the most capital-abundant country in the world—exported commodities that were more labor -intensive than capital-intensive, contrary to H-O theory. For many economists, Leontief's paradox undermined the validity of the Heckscher—Ohlin theorem H—O theory, which predicted that trade patterns would be based on countries' comparative advantage in certain factors of production such as capital and labor.

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