# 经济代写|国际经济学代写International Economics代考|ECON440

## 经济代写|国际经济学代写International Economics代考|EMPIRICAL TESTS OF THE HO THEOREM: LEONTIEF PARADOX

The foremost empirical test of the HO theorem was done by Leontief (1954). Using the data for exports and imports of the United States after World War II, he observed that it was exporting relatively labour-intensive goods to the rest of the world. But the United States was by far

the most capital-abundant country in the world. Given the export composition of the United States in 1947, Leontief estimated labour and capital requirements for producing a bundle of export goods to be worth USD 1 million. On the other hand, observing the import composition of its imports, he estimated labour and capital required to produce USD 1 million worth of imports if these were produced in the United States instead of being imported. His estimates showed that domestic production of the imported goods would have required 30 per cent more capital per worker than what the production of export goods required. He repeated his tests for 1951 and observed a similar pattern of trade though the relative capital intensity of import replacement was substantially less than what it was in 1947. Hence, he concluded that the United States was importing relatively capital-intensive goods. This observation, known as the Leontief Paradox, raised considerable interest among trade theorists to reconcile it with the $\mathrm{HO}$ theorem that a capital abundant country should export relatively capital intensive goods. Further tests for 1962 data supported the paradox, but for 1972, Stern and Maskus (1981) observed the paradox to vanish for the United States. Leontief’s test, when applied to other countries’ trade data, yielded similar paradoxical results. Pattern of trade in more recent times for China and India, for example, also provide indirect evidence that a country’s trade pattern may not be fully consistent with its endowment pattern. Despite these countries being unskilled labour-abundant countries, their basket of exports even to the skilled-labour-abundant countries contains a large proportion of high-technology and skill-intensive commodities.
A theoretical reconciliation of the Leontief Paradox with the HO theorem was offered primarily in terms of a stronger taste bias, factor intensity reversal, and cross-country technology differences. As explained in the earlier chapters, if consumers in a labour-abundant country have a very strong taste bias in labour-intensive commodities, the country may end up exporting capital-intensive commodities. In case of factor intensity reversal, on the other hand, referring back to Figure $6.10$, when the endowment differences of the countries are too large, relative wages in the two countries differ in a way that textiles are produced with relatively labour-intensive techniques in the home country but by relatively capital-intensive techniques in the foreign country. Thus, if the capital and labour required to produce import replacements in the foreign country are measured, as Leontief did, it will appear that the foreign country being relatively capital abundant imports relatively capital-intensive textiles.

## 经济代写|国际经济学代写International Economics代考|Factor Immobility and Specific Factors

Recall that one of the assumptions of the HOS model is that all factors move freely and instantaneously from one sector to another within a country that offers a higher rate of return. But this may not be the case always. Some factors are less mobile than others. For example, in the very short run, we can expect that physical capital is completely immobile. It is only in the medium or long run that physical capital employed or installed in one sector can be transferred to the other sector. The immediate implication of this immobility of physical capital within a country is that if initially there had been any difference in the rate of return to capital in the two sectors, that difference will persist in the short run, though it will evaporate in the long run when capital can move to the high-return sector. ${ }^1$ This case of immobility of some factors significantly alters almost all the core propositions of the HOS model.

Alternatively, all factors may be mobile even in the short run, but different sectors may require different skill levels and/or different types of capital. For example, production of computers requires the skills of hardware engineers, which is not of much use in textile production. Production of textiles requires altogether different types of skilled workers. Similarly, capital required to produce computers may be of a different type than the capital required to produce textiles. Thus, factors may have sector-specific use. This specific factor case in essence is the same as the case of factor immobility in the sense that the rate of return for specific types of capital or skills will differ across sectors. The difference between the two cases, however, is that the differential rates of return will persist even in the long run in the specific factor case. Once again, the core propositions are altered in the same fashion as in the case of factor immobility. To illustrate, we follow the Specific Factor (henceforth, SF) model developed by Ronald W. Jones (1971). This model essentially extends the $2 \times 2$ HOS model into a twocommodity-three-factor model. Thus, what this SF model indicates is that some of the core propositions or the properties of the $2 \times 2$ HOS model do not extend to higher dimensions.

## 经济代写|国际经济学代写国际经济代考|因素不流动和特定因素

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