Who was 'Wassily Leontief'

Wassily Leontief was a Nobel Prize-winning Russian-American economist and professor, known for his research on input-output analysis, which shows how changes in one sector of the economy can affect other sectors.

BREAKING DOWN 'Wassily Leontief'

Wassily Leontief’s research into input-output analysis, which won him the Nobel Memorial Prize in Economics in 1973, has been used by the World Bank, the United Nations and the U.S. Department of Commerce, to estimate the impacts of positive and negative economic shocks, and analyze ripple effects throughout an economy. Using input-output tables, one can estimate the impact that a change in production of a good will have on other industries and their inputs – and establish just how interdependent economic sectors are.

Leontief campaigned all his life for the use of quantitative data in the study of economics. He taught at Harvard for 44 years and then New York University. Four of his doctoral students have also been awarded the prize: Paul Samuelson (1970), Robert Solow (1987), Vernon L. Smith (2002) and Thomas Schelling (2005). Leontief died in New York in 1999.

Contribution to Trade Theory

When Leontief used input-output analysis to study trade flows between the U.S. and other countries, he discovered that countries with a great deal of capital import capital-intensive commodities and export labor-intensive commodities. According to economic theory, countries should export according to their comparative advantage — that is, capital-intensive countries should import labor-intensive goods and export capital-intensive goods.

The Leontief paradox, as it came to be known, led many economists to question the Heckscher-Ohlin theorem, according to which countries produce and export what they can most efficiently – depending on their factors of production — and import goods that they cannot produce as efficiently. A variety of other models have been used to explain why industrialized and developed countries traditionally lean toward trading with one another and rely less heavily on trade with developing markets.

The Linder hypothesis attempts to address problems with the Heckscher-Olin theory, by suggesting that countries will specialize in the production of certain high quality goods, and will trade these goods with countries that demand these goods.

  1. Nobel Memorial Prize In Economic ...

    The Nobel Memorial Prize in Economic Sciences is a prestigious ...
  2. Heckscher-Ohlin Model

    The Heckscher-Ohlin Model is an economic theory stating countries ...
  3. Net Exporter

    A net exporter is a country or territory whose value of exported ...
  4. Paul Samuelson

    Paul Samuelson was an economics professor at MIT who received ...
  5. Thomas C. Schelling

    Thomas C. Schelling is an American economist who won the 2005 ...
  6. Douglass C. North

    Douglass C. North was an American economist and winner of the ...
Related Articles
  1. Investing

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
  2. Insights

    Why Can't Economists Agree?

    There are many reasons why economists can be given the same data and come up with entirely different conclusions.
  3. Investing

    How 5 Influential Economists Changed Americas History

    Find out how five economists made contributions to financial theory that crossed over into many aspects of social history in America such as Adam Smith.
  4. Trading

    Weakest Currencies against the U.S. Dollar in 2015

    The U.S. dollar has been pummeling other currencies, largely due to falling global commodity prices. Here are the worst performing currencies of 2015.
  5. Investing

    4 Countries Pleading for Higher Commodity Prices

    Discover what countries are struggling the most from the price collapse in commodities and what these countries require to return to economic growth.
  6. Investing

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  7. Trading

    Countries Most Affected By A Strong U.S. Dollar

    The U.S. dollar is still the most important currency in the world. It's used for trade, foreign reserves, and as a substitute for the gold standard. As the U.S. dollar continues to grow stronger, ...
  8. Investing

    Capital Intensive Companies: What Are The Pros & Cons for Investors?

    Learn about the pros and cons of investing in capital-intensive industries. Find out how barriers to entry and mature industries impact investment outlook.
  1. What economic indicators are most used when forecasting an exchange rate?

    Discover what economic indicators are most widely used to forecast a country’s exchange rate and how various factors influence ... Read Answer >>
  2. Which factors can influence a country's balance of trade?

    Find out about the factors that affect a country's overall balance of trade and how it is used as an economic indicator. Read Answer >>
  3. How does globalization impact comparative advantage?

    Learn how comparative advantage is becoming increasingly relevant due to globalization and how this has affected both advanced ... Read Answer >>
  4. What is the difference between a capital good and a consumer good?

    Learn to differentiate between capital goods and consumer goods, determined by how those goods are used, and see why capital ... Read Answer >>
  5. How did the Soviet economic system affect consumer goods?

    Discover how the now-defunct Soviet economic system affected domestic consumer goods markets. Communist ideology dictated ... Read Answer >>
  6. How do "factor endowments" impact a country's comparative advantage?

    Find out how factor endowments – namely labor, land and capital – affect a country's comparative advantage and how that advantage ... Read Answer >>
Trading Center