Abstract
The primary purpose of this paper is to re-examine the compatibility of the factor endowment theorem with the foreign trade of both the United States and Taiwan. The study presents evidence that the so-called Leontief paradox may be attributable to technological gaps and factor intensity reversals between the two trading countries. In addition, the conditions for existence of the paradox are generalized. A distinctive feature of this study is that the technologies of both countries are taken into account. The findings reveal that if one-sided technical coefficients, of either the United States or Taiwan, are used for the empirical tests, the Leontief paradox tends to result. The paradox is likely to disappear when the Leontief index is derived from the technical coefficients of both trading countries.
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I am deeply indebted to Nobel Laureate Lawrence R. Klein for his valuable suggestions and wish to express my gratitude to Richard A. Marston and an anonymous referee for their helpful comments.
The views expressed here are entirely mine.
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Tsao, J.T.H. Factor endowments and trade of the United States and Taiwan: The Leontief paradox re-examined. Empirical Economics 5, 245–253 (1980). https://doi.org/10.1007/BF01848053
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DOI: https://doi.org/10.1007/BF01848053