Leontief Paradox Explored A New Trade Pattern When Countries Have Different Technologies

The trade pattern can be counted as the number one topic for international economics. Based either on the concept of Trefler’s effective factor endowments (Trfler, 1993) or on the concept of Fisher and Marshall’s virtual factor endowments (Fisher and Marshall, 2008), the trade pattern described by Leontief tests is right. This paper demonstrates that there are three trade patterns: the Heckscher-Ohlin trade, the Leontief trade, and the factor conversion trade (or one-side Leontief trade) when countries have different technologies. Methodologically, the popular sign predictions in empirical studies include both the Leontief trade and the Heckscher-Ohlin trade. Therefore, the sign predictions’ results cannot be used to reject the Leontief paradox. The factor conversion trade occurs when a model is with the existence of factor intensity reversals (FIRs). Many studies have demonstrated evidence of the factor intensity reversals (FIRs). They mean the Leontief trade. Another new finding is that the Leontief trade can occur when FIRs do not present.