ABSTRACT
Standard international trade theory considers the case in which countries specialize in the production of private goods. In an open economy, countries specialize in the production of the private goods in which they have a comparative advantage. In this way, all countries gain from trade and improve their welfare and their level of development. This theory has even more optimistic implications when public goods are included in the picture. Most catch-up theories of development were based on the idea that the wealthier and more advanced countries were likely to specialize in knowledge-intensive processes and, therefore, make substantial investments in public goods that could also be used by poorer countries. International trade would have either implied symmetric benefits or even repaired pre-existing asymmetries between developed and developing countries.
