This paper studies the link between volatility, labour market flexibility, and international trade. International differences in labour market regulations affect how firms can adjust to idiosyncratic shocks. These institutional differences interact with sector specific differences in volatility...

We extend the theoretical framework in Cuñat and Melitz (2007) to a many-country setup where countries exhibit different degrees of labor market flexibility. We rely on the insights from a recent paper by Costinot (2009) to obtain precise predictions about comparative advantage in this setting:...

We propose a quantitative framework for the analysis of industrialization in which specialization in manufacturing or agriculture is driven by comparative advantage and non-homothetic preferences. Countries are integrated through trade but trade is not costless and geographic position matters....