The_Heckscher-Ohlin_Model__Lesson_25_

The_Heckscher-Ohlin_Model__Lesson_25_ - The Leontief...

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1 Lesson 25 1 The Leontief Paradox Does empirical evidence provide support for the H-O model? How would one go about testing the predictions of the H-O model? Lesson 25 2 First empirical investigation of H-O model undertaken by Wassily Leontief Paper published in the Proceedings of the American Philosophical Society (1953) Since there are more than 2 countries, more than 2 inputs, and more than 2 goods in the world, how does one test the model? Lesson 25 3 Interpret the two goods as “baskets” or “bundles” of goods e.g., let X represent the representative basket of goods that the United States exports And let Y represent the representative basket of goods that the United States imports
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2 Lesson 25 4 A typical basket of exports might include a particular number of cars and bushels of wheat A typical basket of imports might include some steel and textiles In principle, one might measure the amount of capital and labor used in producing each of these typical baskets Lesson 25 5 There are some complications…for example the production of cars uses steel, as well as capital and labor But Leontief invented a method to solve these problems Using U.S. data from 1947, Leontief
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This note was uploaded on 09/14/2009 for the course ECON 340 taught by Professor Leidholm during the Summer '08 term at Michigan State University.

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The_Heckscher-Ohlin_Model__Lesson_25_ - The Leontief...

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