Absolute advantages and capital mobility in international trade theory

Abstract

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 specialisation 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 generalisation of a result obtained by Parrinello is provided.