Solving Leontief's Paradox with Endogenous Growth Theory

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Title: Solving Leontief's Paradox with Endogenous Growth Theory
Authors: Sorg-Langhans, GeorgeStruck, Clemens C.Velic, Adnan
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Date: 29-Nov-2018
Online since: 2019-05-22T12:25:55Z
Abstract: 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.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Start page: 1
End page: 26
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP2018_19p
Copyright (published version): 2018 the Authors
Keywords: Factor-proportions tradeHeckscher-Ohlin-VanekMacroeconomic general equilibrium modelsEndogenous growthBiased productivity
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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