The author formulates a simple model that captures two hypotheses: (i) that countries absolutely abundant in skilled labor will be net exporters in R&D-intensive industries and (ii) that countries with a large domestic market will be net exporters in scale-intensive industries. The hypotheses...

Recent trade theory in the Krugman (1980) tradition predicts that countries with larger market size enjoy higher levels of total factor productivity (TFP) - and equivalently of real per capita income or welfare - as a smaller fraction of spending on inputs is affected by trade costs. However, in...