This paper analyzes the determinants of protectionism in a small open economy with search frictions. This this environment, jobs generate rents whose access depends on the level of trade protectionn. By raising the domestic price of a good, a government may attract more firms in a particular industry. This raises the probability that workers will find jobs in this sector, and in turn, will benefit from the associated rents. Though simple, this channel may help explain a variety of stylized facts on the structure of trade protection and individual trade-policy preferences.

This paper proposes a simple theory of international trade with endogenous technological differences across countries. The core of our analysis lies in the determinants of the division of labor. We consider a world economy comprising two large countries, with a continuum of goods and one factor of production, labor. Each good is characterized by its complexity, defined as the number of tasks that must be performed to produce one unit. There are increasing returns to scale in the performance of each task, which creates gains from specialization, and uncertainty in the inforcement of each contract, which create transaction costs. The trade-off between these two forces pins down the size of productive teams across sectors in each country. Under free trade, the country where teams are larger specializes in the more complex goods. In our model, it is the country where the product of institutional quality and human per worker capital is larger. Hence, better institutions and more educated works are complementary sources of comparative advantage in the more complex industries.

The WTO and EU have chosen two differernt agreements on product standards. While the WTO's approach is primarily based on a "National Treatment" (NT) principle, the EU's approach crucially relies on a principle of "Mutual Recognition" (MR). This paper offers a first look at the comparative performance of these two principles. We show that standards are imposed for levels of externalities that are too low under NT and too high under MR. This suggests that NT should be preferred to MR when the amount of trade in goods characterized by high levels of externalities is large.

Aggregate production functions are a standard feature of the trade theorist's toolbox. While this modeling device has generated some fundamental insights, it presents one obvious shortcoming: it necessarily ignores any effect that the distribution of factor endowments across agents may have on international trade flows. This paper develops a general fraemwork that can shed light on these effects and discusses several applications.

Though one of the pillars of the theory of international trade, the extreme predictions of the Ricardian model have made it unsuitable for empirical purposes. A seminal contribution of Eaton and Kortum (2002) is to demonstrate that random productivity shocks are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important questions: What goods to countries trade? Our main contribution is to generalize their approach and provide and empirically meaningful answer to this question.

Though one of the pillars of the theory of international trade, the extreme predictions of the Ricardian model have made it unsuitable for empirical purposes. A seminal contribution of Eaton and Kortum (2002) is to demonstrate the stochastic productivity differences at the firm-level are sufficient to make the Ricardian model empirically relevant. While successful at explaining trade volumes, their model remains silent with regards to one important question: What goods do countries trade? Our main contribution is to generalize their approach and provide an empirically meaningful answer to this question.