This paper investigates the impact of progressive trade openness on the formation of entrepreneurship in a two-country occupation choice model with monopolistic competition. We show that trade opening gives rise to a non-monotonic process of international specialization, in which the share of entrepreneurial firms in the large (small) country first increases (decreases) and then decreases (increases), with the global economy exhibiting first de-industrialization and then re-industrialization. Journal of Economic Literature Classification Numbers: F12, F16, J24, O14, R12.

Key Words: entrepreneurship, monopolistic competition, trade liberalization.

International Journal of Economic Theory 7, 93-109 (2011).
First version: October 5, 2007; this version: February 15, 2010. PDF file
(Older version: May 22, 2009. PDF file)

Former title: Trade and Entrepreneurship with Heterogeneous Workers