Network externalities as a source of comparative advantage

This note examines how the network externalities of communications activities and trading opportunities interact to determine the structure of comparative advantage between countries. These interactions are obtained by constructing a two-country, two-sector model of trade involving a communications network sector. The role of network interconnectivity, which allows users of a network to communicate with users of another network, is also explored. A comparative advantage in the good that requires network services is held by the countries with interconnected networks.