Answer to Question #292823 in Economics for Hafsa

Question

What is meant by the Leontief paradox? What are some possible explanations of the paradox? How can human capital contribute to the explanation of the paradox?

Answer 1

Leontief's paradox in economics is that a country with a higher capital per worker has a lower capital/labor ratio in exports than in imports.

This means that a capital rich country, such as the U.S., would be expected to export capital-intensive goods and import labor-intensive goods from countries where labor is comparatively cheaper.

Several later economists proposed solutions to this apparent paradox, including the Linder Hypothesis and the Home Market Effect.