The Loss from Trade with Capital Goods: The Sraffian Bonus Can Be Negative

27 Pages Posted: 11 Jul 2018

Date Written: June 17, 2018

Abstract

Paul A. Samuelson extends the Ricardian theory of foreign trade to a model of small open economies in which countries can trade semi-finished capital goods on international markets, as well as trade in produced consumer goods. He argues that this extension provides an additional gain from trade, which he labels the Sraffian bonus. This article demonstrates that trade in consumer and capital goods can result in a loss for an economy, given positive rates of profits in the trading countries, as compared with trade in consumer goods only. In other words, the Sraffian bonus can be negative.

Keywords: Foreign Trade, Sraffian Bonus, Comparative Advantage

JEL Classification: B51, D24, F10

Suggested Citation

Vienneau, Robert L., The Loss from Trade with Capital Goods: The Sraffian Bonus Can Be Negative (June 17, 2018). Available at SSRN: https://ssrn.com/abstract=3199288 or http://dx.doi.org/10.2139/ssrn.3199288

Robert L. Vienneau (Contact Author)

Independent ( email )

209 Maple Street
Rome, NY 13440
315-336-5417 (Phone)
315-334-4964 (Fax)

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