On the Role of Profits-Wages Ratios in the Determination of the Long-Run Behavior of International Relative Prices

Jacobo Ferrer (), Adrián Martínez-González () and Luis Daniel Torres-González ()
Additional contact information
Jacobo Ferrer: New School for Social Research, United States
Adrián Martínez-González: Universidad National Autonoma de Mexico
Luis Daniel Torres-González: Universidad National Autonoma de Mexico

No CSWP67, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: This paper presents a reconstruction and evaluation of the theory of international relative prices (IRP) based on the theory of ‘real competition’.The main thesis of the theory is that the long-run behavior of the IRP of tradable commodity bundles is exclusively determined by their relative total unit labor costs (RTULC). This is equivalent to the assertion that the total profits-wages ratios (TPWR) of these two bundles are sufficiently similar over time and, therefore, neutral in the long run. We identified a set of issues that cast doubt on the strength of the theory. Firstly, due to accounting considerations,the proposed hypotheses cannot constrain IRP to depend solely on the RTULC. Secondly, the theoretical and empirical arguments put forth by the literature to constrain the TPWR are weak. The paper presents a comprehensive investigation of industries’ TPWR, which reveals that their statistical regularities do not align with the constraints necessary for the validity of the theory’s core thesis.

Keywords: real exchange rates; terms of trade; absolute advantage; unit labor costs; capital intensities. (search for similar items in EconPapers)
Pages: 54 pages
Date: 2024-08-01
New Economics Papers: this item is included in nep-hme and nep-inv
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.centrosraffa.org/public/9a28a87b-83e9-4fc0-b6ce-7dc6c2698ae8.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:sraffa:0067

Access Statistics for this paper

More papers in Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa" Contact information at EDIRC.
Bibliographic data for series maintained by Saverio M. Fratini ().