This paper proposes a simple theory of international trade with endogenous productivity 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...

The WTO and the EU have chosen two different 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...