A note on capital utilization and international trade

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Management Department

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Research Article

Publication Title

Contributions to Political Economy

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© The Author 2017. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. This article integrates the analysis of durable capital utilization in the theory of international trade. Variations in capital utilization are analytically accounted for in the form of shift work. Accordingly, producers normally choose the combination of the system of operation of durable capital and labor input that minimizes costs. The choice of the system of operation of durable capital is shown to affect the terms of trade and thereby the structure of production in such a way as to make it desirable, following changes in income distribution, to adopt a new combination of capital utilization and labor input. On certain simplifying assumptions associated with the properties of Sraffa models, linear technologies, long period positions, and steady growth, these possibilities affect, in an unpredetermined manner, the inducement to trade and the direction and extent of the resulting specialization. The results are independent of any differences in the technical conditions of production of the trading countries or the existence of heterogeneous capital goods.

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