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Cost Competition, Fragmentation and Globalization

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Author Info
Barbara Dluhosch
Michael Burda ()

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Abstract

This paper proposes a model in which the removal of barriers to trade and factor mobility is associated with endogenous fragmentation of the value-added chain. Fragmentation is the outcome of cost competition _ the profit-maximizing choice of cost structure by monopolistically com-petitive firms. An expansion of the integrated trading area can induce globalization not only in the horizontal dimension associated with love-of-variety preferences, but also in a vertical dimension as firms vary specialization of production stages. While increased trade is likely to in-duce fragmentation when the number of firms is fixed, free entry can either reverse or intensify this result.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 393.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_393

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Related research
Keywords: International trade organization of production technology choice division of labor

Other versions of this item:

Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  2. Sachs, Jeffrey D & Shatz, Howard J, 1996. "U.S. Trade with Developing Countries and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 234-39, May. [Downloadable!] (restricted)
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    Other versions:
  6. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
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  8. Francois, Joseph F, 1990. "Producer Services, Scale, and the Division of Labor," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 715-29, October. [Downloadable!] (restricted)
  9. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  10. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 327-377. [Downloadable!]
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    Other versions:
  17. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557. [Downloadable!] (restricted)
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  21. Yeats, Alexander J., 1998. "Just how big is global production sharing?," Policy Research Working Paper Series 1871, The World Bank. [Downloadable!]
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    Other versions:
  24. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
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  27. repec:fth:michin:422 is not listed on IDEAS
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    Other versions:
  29. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  30. Feenstra, Robert C & Markusen, James R & Zeile, William, 1992. "Accounting for Growth with New Inputs: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 415-21, May. [Downloadable!] (restricted)
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  33. Burda, Michael C & Dluhosch, Barbara, 1998. "Globalization and European Labour Markets," CEPR Discussion Papers 1992, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  34. Michael C. Burda & Barbara Dluhosch, 2000. "Fragmentation, Globalization and Labor Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hartmut Egger & Peter Egger, 2004. "Outsourcing and Trade in a Spatial World," DEGIT Conference Papers c009_025, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
    Other versions:
  2. Michael C. Burda & Barbara Dluhosch, 2000. "Fragmentation, Globalization and Labor Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Carsten Ochsen & Heinz Welsch, 2005. "Technology, trade, and income distribution in West Germany: A factor-share analysis, 1976-1994," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 321-345, November. [Downloadable!]
  4. Alyson Ma, 2006. "On the choice of in-house production versus outsourcing by multinationals," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 15(2), pages 231-254, June. [Downloadable!] (restricted)
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This page was last updated on 2008-7-23.


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