European economic integration: Comparative advantages and free trade of the means of production

One of the most well-known theories of international trade suggests that when markets are left free to operate, countries should specialise according to their Comparative Advantages (CAs). However, the results provided by Boglioni and Zambelli (2017) suggest that CAs do not seem to have worked in Europe during the period 1995-2011. The computation of the Net Product Possibility Frontier (NPPF) implies that we need to make assumptions about the tradability of the output and also of the means of production (i.e. the inputs of each industry). In this paper, we compute the NPPF associated with a case in which both the final goods and the means of production are considered to be tradable. There is evidence that for the case of the European Union, the national specialisation and the efficient allocation of resources implied by standard CAs theory seem not to have been realised. (C) 2018 Published by Elsevier B.V.