Development and Underdevelopment in the History of Economic Thought

Absolute advantages and capital mobility in international trade theory

Bellino Enrico, Università Cattolica del Sacro Cuore, Piacenza
Fratini Saverio Maria, Roma Tre University

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

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