Value transfers in trade: an explanation of the observed differences in development

Purpose – The purpose of this paper is to expand and further pursue the quest on value transfer in trade. The reason is that the assessment of the cause, the source and the mechanism of value transfer in trade may reveal the rationale upon which the observed and long-lasting differences in sectoral, regional, and national development records may be justified. Design/methodology/approach – The authors' analysis relies on the concept of free competition as developed by the classical economic tradition and particularly on the notions of regulating capital and dominant technique, whose interface forms the theoretical ground upon which can be confirmed the transfer of values between and within industries and by extension between and within regions and economies. Findings – It is revealed that the cause of value transfers is capital competition, their source is differential productivity whereas the mechanism for these value transfers is national and international trade. Practical implications – The analysis provides a theoretical ground upon which a new development policy may be designed which will pay attention to value transfers among sectors, regions and economies. Originality/value – The paper argues that transfers of value are consummated from the less efficient sectors/economies characterized mostly by low technological achievements to more efficient ones.