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Endogenous comparative advantage via symmetry‐breaking policy equilibrium

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  • Nobuhito Suga
  • Akihiko Yanase
  • Makoto Tawada

Abstract

In this study, we analyze a symmetric policy game in a two‐country model in which domestic policy affects a Ricardian comparative advantage. Considering a two‐good, one‐factor set‐up in which each country's government provides a productive public good, we show that ex ante identical countries under free trade always choose different levels of public goods in the Nash equilibrium – meaning symmetry‐breaking always occurs. We also examine how our analysis is modified in the presence of trade costs and in a multi‐good set‐up. Moreover, we present a more elaborate model with input–output linkages and entry regulation in an upstream market as an application.

Suggested Citation

  • Nobuhito Suga & Akihiko Yanase & Makoto Tawada, 2026. "Endogenous comparative advantage via symmetry‐breaking policy equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 128(3), pages 748-786, July.
    • Handle: RePEc:bla:scandj:v:128:y:2026:i:3:p:748-786
    DOI: 10.1111/sjoe.70007
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