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Produced means of production and the chain of comparative advantages

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  • Dvoskin, Ariel
  • Ianni, Guido

Abstract

We study the effects of income distribution on comparative costs and show that the presence of produced means of production dramatically affects the possibility to build a “chain of comparative advantages” to explain the direction of trade. Specifically, we show that: i) comparative autarky costs are bad predictors of the trade pattern because comparative costs are no longer proportional to relative wages; ii) to ensure that a single break in the chain suffices to separate imported from exported commodities, at most one tradable capital good may be employed in production. With heterogeneous capital goods, the chain may need to be broken into many segments. iii) A change in the profit rate may alter the ordering of the links, even if the chain is well behaved for a constant profit rate. And iv) the plausibility of the chain of comparative advantages requiring multiple links for the same industry increases with the profit rate.

Suggested Citation

  • Dvoskin, Ariel & Ianni, Guido, 2021. "Produced means of production and the chain of comparative advantages," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 635-647.
    • Handle: RePEc:eee:streco:v:59:y:2021:i:c:p:635-647
    DOI: 10.1016/j.strueco.2021.10.006
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    More about this item

    Keywords

    Chain of Comparative Advantage; Comparative Costs; Imported Capital Goods; Pattern of Trade;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • F10 - International Economics - - Trade - - - General
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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