IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

International Trade, Factor Mobility and the Persistence of Cultural-Institutional Diversity

  • Marianna Belloc
  • Samuel Bowles
Registered author(s):

    Cultural and institutional differences among nations may result in differences in the ratios of marginal costs of goods in autarchy and thus be the basis of specialization and comparative advantage, as long as these differences are not eliminated by trade. We provide an evolutionary model of endogenous preferences and institutions under autarchy, trade and factor mobility in which multiple asymptotically stable cultural-institutional conventions may exist, among which transitions may occur as a result of decentralized and un-coordinated actions of employers or employees. We show that: i) specialization and trade may arise and enhance welfare even when the countries are identical other than their cultural-institutional equilibria; ii) trade liberalization does not lead to convergence, it reinforces the cultural-institutional differences upon which comparative advantage is based and may thus impede even Pareto-improving cultural-institutional transitions; and iii) by contrast, greater mobility of factors of production favors decentralized transitions to a superior cultural-institutional convention by reducing the minimum number of innovators necessary to induce a transition.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 126.

    in new window

    Length: 42
    Date of creation: Sep 2009
    Date of revision:
    Handle: RePEc:sap:wpaper:wp126
    Contact details of provider: Postal: Via Del Castro Laurenziano 9, 00161 Roma
    Phone: +39 6 49766353
    Fax: +39 6 4462040
    Web page:

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Enrico Spolaore & Romain Wacziarg, 2007. "The Diffusion of Development," Discussion Papers Series, Department of Economics, Tufts University 0704, Department of Economics, Tufts University.
    2. Alejandro Cuñat & Marc J. Melitz, 2012. "Volatility, Labor Market Flexibility, And The Pattern Of Comparative Advantage," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 225-254, 04.
    3. Tabellini, Guido, 2007. "The Scope of Cooperation: Values and incentives," CEPR Discussion Papers 6534, C.E.P.R. Discussion Papers.
    4. Alessandra Casella & Jonathan S. Feinstein, 2002. "Public Goods in Trade on the Formation of Markets and Jurisdictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 437-462, May.
    5. Olivier, Jacques & Thoenig, Mathias & Verdier, Thierry, 2008. "Globalization and the dynamics of cultural identity," Journal of International Economics, Elsevier, vol. 76(2), pages 356-370, December.
    6. repec:cup:cbooks:9780521855266 is not listed on IDEAS
    7. Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2007. "Fairness and contract design," Munich Reprints in Economics 20618, University of Munich, Department of Economics.
    8. Vlachos, Jonas & Svaleryd, Helena, 2001. "Financial Markets, the Pattern of Specialization and Comparative Advantage. Evidence from OECD countries," SSE/EFI Working Paper Series in Economics and Finance 449, Stockholm School of Economics, revised 03 Sep 2001.
    9. Kiminori Matsuyama, 2004. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Discussion Papers 1389, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Pol Antr�s, 2005. "Incomplete Contracts and the Product Cycle," American Economic Review, American Economic Association, vol. 95(4), pages 1054-1073, September.
    11. Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
    12. Fenoaltea, Stefano, 1984. "Slavery and Supervision in Comparative Perspective: A Model," The Journal of Economic History, Cambridge University Press, vol. 44(03), pages 635-668, September.
    13. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
    14. Avner Greif, 2002. "Institutions and Impersonal Exchange: From Communal to Individual Responsibility," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(1), pages 168-, March.
    15. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    16. Kletzer, Kenneth & Bardhan, Pranab, 1987. "Credit markets and patterns of international trade," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 57-70, October.
    17. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
    18. Andrei A. Levchenko, 2008. "International Trade and Institutional Change," Working Papers 579, Research Seminar in International Economics, University of Michigan.
    19. Abhijit Banerjee & Lakshmi Iyer, 2010. "History Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," Working Papers id:2811, eSocialSciences.
    20. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Cultural Biases in Economic Exchange," CEPR Discussion Papers 4837, C.E.P.R. Discussion Papers.
    21. Do, Quy-Toan & Levchenko, Andrei A., 2009. "Trade, inequality, and the political economy of institutions," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1489-1520, July.
    22. Moriguchi, Chiaki, 2003. "Implicit Contracts, the Great Depression, and Institutional Change: A Comparative Analysis of U.S. and Japanese Employment Relations, 1920 1940," The Journal of Economic History, Cambridge University Press, vol. 63(03), pages 625-665, September.
    23. Matthias Doepke & Fabrizio Zilibotti, 2008. "Occupational Choice and the Spirit of Capitalism," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 747-793, 05.
    24. Paola Conconi & Patrick Legros & Andrew Newman, 2012. "Trade Liberalization and Organizational Change," ULB Institutional Repository 2013/145500, ULB -- Universite Libre de Bruxelles.
    25. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
    26. Nilsson, Eric A, 1994. "Empirical Evidence that the Social Relations of Production Matter: The Case of the Ante-bellum U.S. South," Cambridge Journal of Economics, Oxford University Press, vol. 18(3), pages 259-77, June.
    27. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    28. Oded Galor & Omer Moav, 2000. "Natural Selection and the Origin of economic Growth," Working Papers 2000-18, Brown University, Department of Economics.
    29. Samuel Bowles & Sandra Polanía Reyes, 2009. "Economic Incentives and Social Preferences: A Preference-based Lucas Critique of Public Policy," CESifo Working Paper Series 2734, CESifo Group Munich.
    30. Richard B. Freeman, 2000. "Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes," NBER Working Papers 7556, National Bureau of Economic Research, Inc.
    31. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
    32. Marianna Belloc, 2006. "Institutions and International Trade: A Reconsideration of Comparative Advantage," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 3-26, 02.
    33. Ugo Pagano, 2007. "Cultural globalisation, institutional diversity and the unequal accumulation of intellectual capital," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 649-667, September.
    34. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
    35. Esfahani, Hadi Salehi & Mookherjee, Dilip, 1995. "Productivity, contracting modes, and development," Journal of Development Economics, Elsevier, vol. 46(2), pages 203-231, April.
    36. repec:cup:cbooks:9780521671422 is not listed on IDEAS
    37. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    38. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
    39. Vogel, Jonathan, 2007. "Institutions and moral hazard in open economies," Journal of International Economics, Elsevier, vol. 71(2), pages 495-514, April.
    40. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
    41. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sap:wpaper:wp126. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luisa Giuriato)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.