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Diversity and Trade

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  • Giovanni Maggi
  • Gene M. Grossman

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 labor 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 workforce exports the good for which individual success is more important. Imperfect observability of talent strengthens the forces of comparative advantage. Finally, we examine the effects of trade on income distribution and the composition of firms in each industry.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.90.5.1255
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 90 (2000)
Issue (Month): 5 (December)
Pages: 1255-1275

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Handle: RePEc:aea:aecrev:v:90:y:2000:i:5:p:1255-1275

Note: DOI: 10.1257/aer.90.5.1255
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  1. Meyer, Jack & Ormiston, Michael B, 1989. " Deterministic Transformations of Random Variables and the Comparative Statics of Risk," Journal of Risk and Uncertainty, Springer, vol. 2(2), pages 179-88, June.
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  4. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation by Skill," NBER Working Papers 5718, National Bureau of Economic Research, Inc.
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  6. Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-58, December.
  7. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
  8. Levy, Haim & Paroush, Jacob, 1974. "Toward multivariate efficiency criteria," Journal of Economic Theory, Elsevier, vol. 7(2), pages 129-142, February.
  9. James Brander, 1980. "Intra-Industry Trade in Identical Commodities," Working Papers 380, Queen's University, Department of Economics.
  10. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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