Persistence and change in culture and institutions under autarchy, trade, and factor mobility
Differences among nations in culture ( preferences including social norms) and institutions (contracts) may result in specialisation and gains from trade even in the absence of exogenous differences in factor endowments or technologies. Goods differ in the kinds of contracts that are appropriate for their production, and so strategic complementarities between contracts and social norms may result in a multiplicity of cultural- institutional equilibria. The resulting country differences in culture and institutions provide the basis for comparative advantage.