Abstract
In neoclassical economics a form of production function is assumed in which the profit rate and the wage rate, defined as marginal returns to capital and labour, are the partial derivatives of the production function with respect to capital and labour, respectively. Neo-Ricardians have shown that the assumptions inherent to and the conclusions based on these functions are not upheld when the aggregate category of homogeneous capital is subdivided into the categories of physical capital used in the production cycle. However, the disaggregated capital model which is used to show that nonlinearity of the frontiers between wage rate and profit rate, thus providing a demonstration of capital reswitching, does not incorporate space in terms of transportation costs within a regional economy or include trade between regions. Here an expanded version of that model, including both features, is used to demonstrate a case of spatial reswitching.
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