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A new Ricardian model of trade, growth and inequality- The role of financial capital

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  • Sugata Marjit

Abstract

The classical Wage Fund (Financial Capital) framework is integrated with the Ricardian model of comparative advantage. It can easily and effectively reflect on critical contemporary issues without the ammunitions of a more complex neoclassical system. Some of the results are as follows. Trade pampers inequality across the globe independent of trade patterns. It is likely to increase growth rate but that rate declines over time. Technological progress without capital accumulation magnifies inequality in or out of steady state. Financiers may wish to invest in innovations and outsource production to the rest of the world. Financial crisis in terms of credit shortage hurts workers but benefits capitalists etc. Interestingly this Ricardian model with capital and labour replicates many iconic neoclassical results without neoclassical assumptions.

Suggested Citation

  • Sugata Marjit, 2020. "A new Ricardian model of trade, growth and inequality- The role of financial capital," Discussion Papers 2020-28, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:2020-28
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2020/2020-28.pdf
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Andrea Maneschi, 2008. "How Would David Ricardo Have Taught The Principle Of Comparative Advantage," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 1167-1176, April.
    3. Sugata Marjit & Biswajit Mandal, 2017. "Virtual trade between separated time zones and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(2), pages 171-183, June.
    4. Noritsugu Nakanishi & Ngo Van Long, 2020. "A new impetus for endogenous growth: R&D offshoring via virtual labor mobility," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 846-883, August.
    5. Sugata Marjit & Anwesha Basu & C. Veeramani, 2019. "Growth Gains from Trade," CESifo Working Paper Series 7905, CESifo.
    6. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236, Elsevier.
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    Cited by:

    1. Marjit, Sugata & Das, Gouranga G., 2021. "The new Ricardian specific factor model," Journal of Asian Economics, Elsevier, vol. 76(C).

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    Keywords

    New Ricardo; Neoclassical; Trade; Growth; Inequality;
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