This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Aspects of International Fragmentation

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Wilhelm Kohler () (Department of Economics, Johannes Kepler University Linz, Austria)
Abstract

The paper uses a specific-factors framework to address efficiency and distributional implications of international fragmentation which is driven by a foreign location advantage due to a low wage rate. Focusing on the cost-savings linkage between fragmentation and labor demand in the remaining domestic activities, I establish a fragmentation surplus which is familiar to the immigration surplus. However, if the capital which is specific to the fragment produced abroad is an indivisible asset, then fragmentation may cause a domestic welfare loss, because outsourcing takes place in discrete steps where it affords firms "quasi-market-power" on the domestic labor market. The regime shift from purely domestic production to fragmentation is modeled as a two-stage game. In the first stage firms locate their indivisible assets at home or abroad, and in the second they choose optimal employment. The share of fragmented firms is endogenously determined. The paper explores the conditions determining whether the process of fragmentation caused by less costly outsourcing is beneficial for the domestic economy.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.jku.at/papers/2002/wp0208.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2002-08.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: May 2002
Date of revision:
Handle: RePEc:jku:econwp:2002_08

Note: Fortcoming in Review of International Economics.
Contact details of provider:
Fax: +43 732-2468-8238
Web page: http://www.econ.jku.at/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (René Böheim).

Related research
Keywords:

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.:

  1. Deardorff, A.V., 1998. "Fragmentation Across Cones," Papers 98-14, Michigan - Center for Research on Economic & Social Theory.
    Other versions:
  2. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics 95-14, California Davis - Department of Economics.
    Other versions:
  3. Sven W. Arndt, 1997. "Globalization and the Open Economy," Working Papers 9701, Lowe Institute of Political Economy. [Downloadable!]
    Other versions:
  4. Richard G. Harris, 1995. "Trade and Communication Costs," Canadian Journal of Economics, Canadian Economics Association, vol. 28(s1), pages 46-75, November.
  5. Rodrik, Dani, 1998. "Symposium on Globalization in Perspective: An Introduction," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 3-8, Fall. [Downloadable!] (restricted)
  6. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  7. Sven W. Arndt, 1999. "Globalization and economic development," Working Papers 9902, Lowe Institute of Political Economy. [Downloadable!] (restricted)
    Other versions:
  8. Deardorff, Alan V., 2001. "Fragmentation in simple trade models," The North American Journal of Economics and Finance, Elsevier, vol. 12(2), pages 121-137, July. [Downloadable!] (restricted)
    Other versions:
  9. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April. [Downloadable!] (restricted)
  10. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier. [Downloadable!] (restricted)
  11. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June. [Downloadable!] (restricted)
    Other versions:
  12. Irwin, Douglas A, 1996. "The United States in a New Global Economy? A Century's Perspective," American Economic Review, American Economic Association, vol. 86(2), pages 41-46, May. [Downloadable!] (restricted)
  13. Wilhelm Kohler, 2003. "The Distributional Effects of International Fragmentation," German Economic Review, Blackwell Publishing, vol. 4(1), pages 89-120, February.
  14. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May. [Downloadable!] (restricted)
    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. Kurt Kratena, 2004. "Intra-Industry Trade and Input Demand," WIFO Working Papers 238, WIFO. [Downloadable!]
Statistics
Access and download statistics

Did you know? RePEc stands for Research Papers in Economics.

This page was last updated on 2009-12-1.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.