Solving Leontief's Paradox with endogenous growth theory

Arbeitspapier

Theories of international trade have severe difficulties in explaining why, despite i) substantial differences in factor-proportions across industries and ii) considerable cross-country differences in capital-labor ratios, the iii) the evidence for factor-proportions trade is rather weak. We propose a simple explanation of this well known finding: standard trade theories treat important forces such as the distribution of productivity within the economy as exogenous. We argue instead that the productivity allocation is endogenous and counter-balances factor-proportion differentials be- tween countries. Consequently, comparative advantage across countries of different development levels is negligible and this is why the incentives for trade are low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: UCD Centre for Economic Research Working Paper Series ; No. WP18/19

Classification and Topics

• Classification: Wirtschaft ; Neoclassical Models of Trade ; Empirical Studies of Trade ; Open Economy Macroeconomics ; Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
• Subject: factor-proportions trade ; Heckscher-Ohlin-Vanek ; macroeconomic general equilibrium mo- dels ; endogenous growth ; biased productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sorg-Langhans, George ; Struck, Clemens ; Velic, Adnan
• Event: Veröffentlichung
• (who): University College Dublin, UCD School of Economics
• (where): Dublin
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/198572
• Last update: 10.03.2025, 11:41 AM CET