We develop a model of trade between identical countries. Workers endogenously
acquire skills that are imperfectly observed by firms, who therefore use aggregate
country investment as the prior when evaluating workers. This creates an informational
externality interacting with general equilibrium effects on each country's skill premium.
Asymmetric equilibria with comparative advantages exist even when there is a unique
equilibrium under autarky. Symmetric, no-trade equilibria may be unstable under free
trade. Welfare effects are ambiguous: trade may be Pareto improving even if it leads
to an equilibrium with rich and poor countries, with no special advantage to country
Moro, Andrea, and Peter Norman. "Endogenous Comparative Advantage,"
The Scandinavian Journal of Economics 121,
pp. 1088-1124, July
title = "Endogenous Comparative Advantage",
author = "Moro, Andrea and Peter Norman",
year = "2019",
month = " July",
journal = "The Scandinavian Journal of Economics",
volume = "121",
pages = "1088-1124",
url = "http://dx.doi.org/10.1111/sjoe.12291"