Absolute advantages and capital mobility in international trade theory
Capital mobility has the potential of undermining the validity of Ricardo’s theory of comparative advantage. Within this context, the tendency towards a uniform rate of profit makes absolute costs relevant for the analysis of specialization patterns. A historical and analytical reconstruction is presented of a few significant contributions addressing this point, with a particular focus on the possibility of exclusion from trade and production ‘desertification’ caused by a country’s low profitability of capital. A generalization of a result obtained by Parrinello (2010) is provided.
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Keywords: capital mobility; absolute advantage; specialization