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In 1971 Robert Baldwin showed that U.S. imports were 27% more capital-intensive than U.S. exports in the 1962 trade data, using a measure similar to Leontief's. [2] [3]In 1980 Edward Leamer questioned Leontief's original methodology for comparing factor contents of an equal dollar value of imports and exports (i.e. on real exchange rate grounds).
Capital intensity is the amount of fixed or real capital present in relation to other factors of production, especially labor. At the level of either a production process or the aggregate economy, it may be estimated by the capital to labor ratio, such as from the points along a capital/labor isoquant .
Light industry are industries that usually are less capital-intensive than heavy industries and are more consumer-oriented than business-oriented, as they typically produce smaller consumer goods. Most light industry products are produced for end users rather than as intermediates for use by other industries .
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Exports of a capital-abundant country come from capital-intensive industries, and labour-abundant countries import such goods, exporting labour-intensive goods in return. Competitive pressures within the H–O model produce this prediction fairly straightforwardly. Conveniently, this is an easily testable hypothesis.
The internal contradictions of capital accumulation is an essential concept of crisis theory, which is associated with Marxist economic theory. While the same phenomenon is described in neoclassical economic theory , in that literature it is referred to as systemic risk .
The Marxist labor theory of value has been criticized on several counts. Some argue that it predicts that profits will be higher in labor-intensive industries than in capital-intensive industries, which would be contradicted by measured empirical data inherent in quantitative analysis. This is sometimes referred to as the "Great Contradiction ...
For example, skilled laborers may need unskilled laborers to work in the factories skilled laborers design, but at the same time an influx of unskilled labor may make capital intensive production less economically attractive than labor-intensive production, reducing the competitiveness of skilled laborers that design high-tech goods.