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This paper develops a two-country dynamic trade model with a public intermediate good whose stock has a positive effect on private sectors' productivity. Under the assumptions of one primary factor (labor), the national government that determines the level of the public good so as to maximize the discounted sum of a representative household's utility, and the stock of the public intermediate good as a kind of ``unpaid factors,'' this paper examines the economy's trade pattern and the long-run effects of trade. It is shown that in the case of Lindahl pricing for the provision of the public intermediate good, in which each country takes the world prices as given, the country with a smaller labor endowment, a lower depreciation rate of the public-good stock, and/or a lower rate of time preference will become an exporter of a good which is more dependent on the stock of the public intermediate good, and this country will unambiguously gains from trade. We also discuss the case of Nash provision of the public intermediate good, in which each country noncooperatively determines the public good recognizing their effect on the terms of trade.
