Differences among nations in culture (preferences including social norms) and institutions (contracts) may result in specialization 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. In our evolutionary model of endogenous preferences and institutions,
transitions among persistent cultural-institutional configurations occur as a result of decentralized and uncoordinated contractual or behavioral innovations by employers or employees. We show that the gains
from trade raise the cost of deviations from the prevailing culture and institutions. As a result, trade liberalization impedes decentralized transitions, even to Pareto-improving cultural-institutional configurations.
International factor mobility has the opposite effect.
"Persistence and Change in Culture and Institutions under Autarchy, Trade, and Factor Mobility."
American Economic Journal: Microeconomics,
Institutions: Design, Formation, Operations, and Impact
Economics of Contract: Theory
Neoclassical Models of Trade
International Investment; Long-term Capital Movements
Institutions and Growth
Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification