Nikolaus Bayerl Oliver Fritz (WIFO) Robert Hierländer
Abstract
Globalisation is intensifying international trade and imported goods are increasingly being used in production. However, the rising share of imported intermediary goods and services means a decreasing share of gross valued added. According to the "bazaar theory", which is based on this observation, industrialised countries are gradually retreating from production activities, which are being relocated to low-wage countries, and are specialising in trade activities and other business-related services. According to the bazaar theory, if wages are not flexible enough, this structural change may result in the relocation of too large a share of production activities, while failing to create enough jobs in the service sector and thus causing unemployment to rise. The critique of the bazaar theory makes a reference to both the theoretical assumptions as well as to the empirical evidence that often contradicts the theory.
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Volume (Year): 81 (2008) Issue (Month): 11 (November) Pages: 855-879 Download reference. The following formats are available: HTML
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