Publication Type
Working Paper
Version
publishedVersion
Publication Date
12-2002
Abstract
This paper carefully analyzes a passage of Ricardo’s Essay on Profits ([1815] 1923), which suggests that he clearly understood the effects of both interindustry as well as intraindustry trade. In the context of the Essay model, Ricardo argues that free interindustry trade involving an exchange of manufactures for agricultural good (from England’s point of view) raises the rate of profit through lowering the relative price of the agricultural good. On the other hand, where trade involves simply an exchange of manufactures for manufactures, these being produced under conditions of economies of scale (division of labour in manufactures (pg. 25 of Essay)), the rate of profit is unaffected although that exchange of goods does raise welfare by augmenting the variety of commodities made available through intraindustry trade. His Essay, therefore, is a precursor of the new trade theory.
Discipline
Economic Theory | International Economics
Research Areas
Macroeconomics
Volume
25-2002
First Page
1
Last Page
16
Publisher
SMU Economics and Statistics Working Paper Series, No. 25-2002
City or Country
Singapore
Citation
HOON, Hian Teck.
Is Ricardo's Essay on Profits a Precursor of the New Trade Theory?. (2002). 25-2002, 1-16.
Available at: https://ink.library.smu.edu.sg/soe_research/1188
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.