Exam 9: Empirical Tests of the Factor Endowments Approach

If the capital/labor ratio in import-competing industries in country A is $8,000 per worker and the capital/labor ratio in A's export industries is $4,000 per worker, then country A's "Leontief statistic" is __________.

Explain the economic process by which it can be hypothesized that increased participation in international trade by the United States in the last several decades has led to increased income/wage inequality in the United States. Then indicate why some economists doubt that the increased trade has been such an important factor, and explain other influences that economists think might have been important. Finally, if you were to pass judgment on this matter, what would be your view of the source(s) of the increased inequality and how would you defend your view?

Which one of the following could NOT theoretically be offered to help in explaining the "Leontief paradox?"

A 1974 empirical study (by Steven Rosefielde) found that the "Leontief statistic" for the Soviet Union in its trade with Western industrialized nations was 1.44, and its "Leontief Statistic" for its trade with developing countries was 0.43. If the Soviet Union was Trading in accordance with the Heckscher-Ohlin theorem, these results suggest that theSoviet Union was relatively __________ compared to its Western trading partners and __________ compared to developing countries.

How can it be said that the factor-content approach "reveals" a country's factor abundance? What assumptions seem crucial for making this inference? Explain.