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Capital and Labour Requirements for Canada's Foreign Trade*

Published online by Cambridge University Press:  07 November 2014

Donald F. Wahl
Donald F. Wahl*
Affiliation:
Colgate University, Hamilton, N.Y.
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Extract

Since Professor Leontief published his study of American foreign trade factor requirements in 1953, much has been written about the problem. This paper reviews the discussion briefly, and provides some data indicating the factor requirements for Canada's foreign trade.

This paper uses conventional input-output methods; one may criticise input-output results in a number of ways, the most obvious of which is to say that the algebraic solution does not represent the total picture. Professor Leontief, in a reply to Professor Granick and others, willingly admitted that the total picture includes resource endowments in each trading country, primary factors of production, shapes of production functions, input-output relations which govern the transformation of resources into goods and services, and consumer preferences for different bundles of production which can be supplied with alternative combinations of factor inputs. But in addition to this general limitation of the approach there are several specific criticisms.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 27 , Issue 3 , August 1961 , pp. 349 - 358
Copyright
Copyright © Canadian Political Science Association 1961

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Footnotes

*

This paper owes much to the following people: Professor J. Sawyer (University of Toronto) and Professor A. Scott (University of British Columbia). A grant from the Lucius N. Littauer Foundation, Inc., made possible the calculation of inverse matrices. Part of the paper is based on a chapter in my Productivity and the Structure of Canadian Trade 1924-1955 (unpublished PhD Dissertation, Harvard University, 1959).

References

1 Leontief, W., “Domestic Production and Foreign Trade: The American Capital Position Re-Examined,” Proceedings of the American Philosophical Society, XCIV, no. 4, 09, 1953, 332–49.Google Scholar

2 Leontief, W., “Factor Proportions and the Structure of American Trade: Further Theoretical and Empirical Analysis,” Review of Economics and Statistics, XXVIII, no. 4, 11, 1956, 386–407.CrossRefGoogle Scholar Granick, D., “The American Capital Position in Foreign Trade: A Comment,” Southern Economic Journal, XXII, no. 2, 10, 1955, 243–8.CrossRefGoogle Scholar

3 Many of these points were made by Swerling, B., “Capital Shortage and Labor Surplus in the United States?” Review of Economics and Statistics, XXXVI, no. 3, 08, 1954, 286–9.CrossRefGoogle Scholar

4 Canada, Dominion Bureau of Statistics, Supplement to the Inter-Industry Flow of Goods and Services, Canada, 1949, Supplement to Reference Paper no. 72 (Ottawa, 1960).Google Scholar

5 Canada, Royal Commission on Canada's Economic Prospects, Output, Labour, and Capital in the Canadian Economy by Hood, Wm. C. and Scott, Anthony (Ottawa, 1957), chap. vi.Google Scholar

6 Ibid., 234–5.

7 Ibid., 240–6.

8 In the Supplement to Reference Paper no. 72 (see n. 4), intra-industry cells have been omitted from the input per dollar of output matrix as well as from its inverse. The reason for doing this was that in some industry groups intra-industry consumption data were not available. The Dominion Bureau of Statistics felt that a more homogeneous comparison would be obtained if the total output figures excluded intra-industry consumption, but if this method were followed in the present paper the calculations would not be comparable with other calculations made by the author but which are not reported in detail in this paper. For this reason, the flow matrix used herein includes intra-industry consumption.

9 The Supplement to Reference Paper no. 72 supplies a table of competitive and noncompetitive imports on the basis of total trade (p. 25). It does not provide a classification of competitive and non-competitive imports by country of origin, and to overcome this difficulty competitive imports were distributed to the UK and the US so as to be similar to the distribution of trade values presented in Trade of Canada or the Canada Year Book.

10 Canada, Royal Commission on Canada's Economic Prospects, The Future of Canada's Export Trade by Anderson, R. V. and Canada's Imports by Slater, D. W. (Ottawa, 1957).Google Scholar Caves, R. E. and Holton, R. H., The Canadian Economy: Prospect and Retrospect (Cambridge, Mass., 1959).CrossRefGoogle Scholar

11 Caves, and Holton, , The Canadian Economy, p. 400.Google Scholar

12 Robinson, R., “Factor Proportions and Comparative Advantage: Part I,” Quarterly Journal of Economics, LXX, no. 2, 05, 1956, 358.Google Scholar

13 Valavanis-Vail, S., “Leontief's Scarce Factor Paradox,” Journal of Political Economy, LXII, no. 6, 12, 1954, 523–8.CrossRefGoogle Scholar

14 Diab, M., The United States Capital Position and the Structure of Its Foreign Trade (Amsterdam: North Holland Publishing Company, 1956).Google Scholar

15 Swerling, B., “Capital Shortage and Labor Surplus in the United States,” Reviews of Economics and Statistics, XXXVI, no. 3, 08, 1954.Google Scholar

16 Ellsworth, P., “The Structure of American Foreign Trade: A New View Examined,” Review of Economics and Statistics, XXXVI, no. 3, 08, 1954, 182.Google Scholar

17 For further information concerning high interest costs see Gordon, H. S., “The Bank of Canada in a System of Responsible Government,” this Journal, XXVII, no. 1, 02, 1961, 1–22.Google Scholar