Last modified: 2019-06-16
Abstract
Ricardo’s analysis of the international trade theory led to two main findings: i) comparative advantages only are relevant for the international specialization; ii) international trade is mutually beneficial. In the well-known classical case with two countries and two commodities, each country has a benefit from specialization in the production of the commodity in which it has a comparative advantage and from the import of the other commodity.
The validity of this claim is closely related to the assumption that capital cannot freely move between countries. In particular, in Ricardo’s example, English capitalists would do better to invest in Portugal, which has an absolute cost advantage for both the productions, but institutional constraints prevent this from happening. Nevertheless, when capital mobility is allowed for, different results may arise.
A first contribution along this direction was provided by Emmanuel (1972). In Emmanuel’s argument, there are two countries, “centre” and “periphery”, and two commodities. International specialization is exogenously given, and the central country employs capital with a greater organic composition than that of the peripheral country. Besides, the real wage rate of the central country is higher than the one of the peripheral country. In consequence of these circumstances, if the rate of profit must be uniform because of the capital mobility, then, according to Emmanuel, a certain amount of the surplus-value produced in the periphery must be moved to the centre.
Emmanuel argument was, at least initially, grounded on Marx’s mechanism of transformation of values into prices of production. Few years later, Gibson (1980) tried to put it on more solid bases, by adopting a Sraffian theory of prices. In doing so, he also included an endogenous determination of international specialization. Gibson, in turn, did not perceive that, in his analysis, the most profitable solution could be the production of both the commodity in the same country. This possibility was then grasped in later studies by Brewer (1985) and Parrinello (2010).