We illustrate a new source of comparative advantage that is generated by

countries’ different ability to adjust to technological change. Our model in-

troduces substitution of workers in codifiable (routine) tasks with more ef-

ficient machines, a process extensively documented in the labor literature,

into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is

that labor reallocation across tasks is subject to frictions, the importance of

which varies by country. The arrival of capital-augmenting innovations trig-

gers the movement of workers out of routine tasks, and countries with low

labor market frictions become relatively abundant in non-routine labor. In

the new equilibrium, more flexible countries specialize in producing goods

that use non-routine labor more intensively. We document empirically that

the ranking of countries with respect to the routine intensity of their exports

is strongly related to labor market institutions and to cultural norms that

influence adjustment to technological change, such as risk aversion or long-

term orientation. The explanatory power of this mechanism for trade flows is

especially strong for intra-EU trade.