Leontief paradox and United Kingdom patterns of trade in manufactures

Abstract

The Heckscher-Ohlin model is concerned mainly with the causes and structure of international trade. According to this model trade arises because countries possess factors of production in different proportions. This leads to differences in factor prices which in turn lead to differences in the relative costs of producing goods. Countries relatively well endowed with capital, for example, will have a comparative advantage in the production of capital intensive goods and will export these and import goods which are labour intensive. Many empirical tests have been carried out to see whether the trade of various countries conforms to the predictions of the model. This paper provides one such test and is concerned with the trade of the United Kingdom. It concludes that, broadly speaking, United Kingdom trade is consistent with the Heckscher-Ohlin model.