You're asking me for literature? This stuff is pretty standard.

The Ricardian Model - Assumptions and Results

The modern version of the Ricardian model and its results are typically presented by constructing and analyzing an economic model of an international economy. In its most simple form, the model assumes two countries producing two goods using labor as the only factor of production. Goods are assumed homogeneous (i.e., identical) across firms and countries. Labor is homogeneous within a country but heterogeneous (non-identical) across countries. Goods can be transported costlessly between countries. Labor can be reallocated costlessly between industries within a country but cannot move between countries. Labor is always fully employed. Production technology differences exist across industries and across countries and are reflected in labor productivity parameters. The labor and goods markets are assumed to be perfectly competitive in both countries. Firms are assumed to maximize profit while consumers (workers) are assumed to maximize utility.

You can relax many of these assumptions, including "labor as the onlu factor of production", but "Labor [the factors of production] can be reallocated ... within a country but cannot move between countries" and "labor [the factors of production] is [are] always fully employed" cannot be relaxed. And, by the way Keynes points out that classical (and marginalistic) economics is basically predicated on the assumption of full employment. The possibility of free movement of capital decapitalising an economy, or leading to massive unemployment, is simply not within the scope of Ricardian comparative advantage. And, in actual fact, the way governments seem today unable to effectively counter the threat of companies taking their capital (e.g., factories), and therefore the jobs they provide, to other countries, indicates that the liberalisation of financial markets has changed the conditions of international trade. I contend that when there is mobility of the factors of production, you have one single economy, not trade between two economies. Ricardo was, in fact, concerned with trade between mostly contained (and therefore meaningful) national economies.

The Wikipedia article on comparative advantage has an example containing this

We need to assume that each of the countries has constant opportunity costs of production between the two products, and that both economies have full employment at all times. Also all factors of production are perfectly mobile within the countries between clothing and food industries, but are immobile between the countries. Finally the price mechanism must be working to provide perfect competition.

The paper How Robust is Comparative Advantage [PDF] considers lots of relaxations of the hypotheses, but at no point does it consider the effect of capital or labour transfers.

By the way, have you searched the ET archives for threads on comparative advantage?

• Division of labour and comparative advantage: what linearity hides in economics by Migeru on November 13th, 2005
  
• Probably incredibly unreadable modelling thread by Colman on June 12th, 2006
  
• EuroTrib Trade Discussion Summary by Drew J Jones on August 20th, 2006
  
• Contesting Free Trade Orthodoxy by TGeraghty on March 29th, 2007
  

And while we're on the topic of Ricardian theory, have a look at Can we resist the Iron Law? by Colman on March 28th, 2006.


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