Working Paper: CEPR ID: DP2005
Authors: Gene M. Grossman; Giovanni Maggi
Abstract: We develop a competitive model of trade between countries with similar aggregate factor endowments. The trade pattern reflects differences in the distribution of talent across the labour forces of the two countries. The country with a relatively homogeneous population exports the good produced by a technology with complementarities between tasks. The country with a more diverse work force exports the good for which individual success is more important. Imperfect observability of talent strengthens the forces of comparative advantage. Finally, we examine an aspect of education policy concerning the spread of human capital across the student population.
Keywords: trade pattern; complementarities; human capital; education policy
JEL Codes: D51; F11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Talent distribution (D39) | Trade patterns (F10) |
| Imperfect observability of talent (D83) | Comparative advantages in diverse countries (F12) |
| Educational policies promoting diversity in talent (I24) | National income (P44) |
| Homogeneous population (R23) | Goods with task complementarity (D10) |
| Diverse workforce (J29) | Goods where individual success is paramount (P12) |