Global Production Sharing and Leontief Paradox: Evidence from Trade between two South Asian Countries

Abstract

The paper attempts to study the factor content of bilateral trade between the two developing countries of India and Sri Lanka. Given instances of production sharing between them and the extent of input trade that they engage in globally, it is only appropriate to use a framework which takes into account all these features. It uses the framework of Remier (2006) and Trefler and Zhu (2010) to find out if trade between them provides evidence of Hecksher-Ohlin pattern of trade. Results of the study provide evidence to support Leontief paradox with respect to this bilateral trade.