Absolute Advantage and International Trade: Evidence from Four Euro-zone Economies

The purpose of this paper is to give empirical content to the approach of international trade based on the principle of absolute advantage and to show that differences in productivity may give rise to transfers of value towards the units of capital with an absolute advantage in production. Our approach is based on the classical/Marxian theories of value and competition and it is operationalized using input-output data for the years 1995, 2000, and 2005 of four euro-zone countries (Greece, Spain, Finland, and the Netherlands). The derived results are consistent with the view that productivity differences persist over the years, which is equivalent to saying that the absolute advantage in production does not change into comparative advantage.