Congestible communications networks and international trade

We build a two-country model of monopolistic competition with communications networks. A communications network is characterized by (1) the existence of large fixed costs of network provision, and (2) the presence of congestion. It is demonstrated that both the size of a country and the relative magnitude of the congestion effect determine its comparative advantage: if the congestion effect (resp., the cost-sharing effect) prevails universally, a comparative advantage in the goods that require communications is held by the smaller (resp., larger) of the two countries.