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Title: Diversity and Trade

Author(s): Gene M. Grossman and Giovanni Maggi

Publication Date: October 1998

Keyword(s): Complementarities, education policy, Human Capital and trade pattern

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Grossman, G and Maggi, G. 1998. 'Diversity and Trade'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2005