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ON THE VALIDITY OF THE LEONTIEF PARADOX TEST
Author(s) -
Kleiman E.
Publication year - 1967
Publication title -
kyklos
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 58
eISSN - 1467-6435
pISSN - 0023-5962
DOI - 10.1111/j.1467-6435.1967.tb00873.x
Subject(s) - economics , argument (complex analysis) , mathematical economics , capital (architecture) , test (biology) , econometrics , mathematics , chemistry , paleontology , biochemistry , archaeology , biology , history
SUMMARY L eontief's test of factor proportions was based on the assumption that, within each U. S. industry, the same factor proportions are used to produce exports, domestic goods, and import substitutes. However, if the Heckscher‐Ohlin theorem is valid, then, within each industry, commodities exported by the U. S. would be charac terized by a higher capital‐labour ratio than those produced to replace imports. Unless the industry classification used is such that it does not allow for both exports and import substitues to be grouped together, the validity of the Heck scher‐Ohlin theorem precludes the possibility of factor proportions being homo geneous in the manner assumed by L eontief . In support of this argument it is claimed that L eontief's own data can be consistent with the traditional theorem. Using Israel input‐output data it is shown also that the strength of the Paradox increases with the degree of aggregation.