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Diversity and Trade

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  • 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 labor forces of the two countries. The country with a relatively homogenous 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 observabilitiy 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.

Suggested Citation

  • Gene M. Grossman & Giovanni Maggi, 1998. "Diversity and Trade," NBER Working Papers 6741, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6741
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    References listed on IDEAS

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    1. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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