Comparative Labor Effectiveness and the Leontief Scarce-Factor Paradox.

In his celebrated study of "The structure of U.S. foreign trade," Wassily Leontief came to the surprising conclusion that the U.S. specializes in labor-intensive lines of production. It would thus seem that this country resorts to foreign trade in order to economize its capital and dispose of its surplus labor. Since the U.S. is known to have a far higher capital/labor ratio than its trading partners, this finding contradicts the basic Ohlin model which explains international trade in terms of relative factor endowments. Under it a country would export those products which are intensive in its relatively abundant resource and import those which are intensive in its relatively scarce resource. A wealth of statistical and theoretical material has been published in the past decade in an attempt to reconcile the empirical finding with the Heckscher-Ohlin theorem. This paper is devoted to an empirical examination of Leontief's hypothesis concerning the superiority of U.S. labor. The problem does not easily lend itself to statistical measurement because of the difficulty of isolating the quality of labor from other factors affecting productivity.