Gains from Trade and Fragmentation
AbstractThis paper discusses the welfare effects, on groups, countries, and the world, of fragmentation. Fragmentation here is defined as the introduction of a technology that permits a production process to be split into separate parts, with the fragments able to be done in different locations. Standard results of trade theory and the gains from trade are then examined to see what they suggest about the gains from fragmentation. The main points made are, first, that it is easy to find examples in which fragmentation hurts particular groups and countries, and even in some circumstances the world. But I also argue that fragmentation is likely to increase world income overall, and therefore that it is likely to be beneficial on average. Based on that, together with our general ignorance of what the more specific effects of fragmentation are likely to be, we should resist attempts to use policies to interfere with it.
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Bibliographic InfoPaper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 543.
Length: 24 pages
Date of creation: 2005
Date of revision:
Find related papers by JEL classification:
- F1 - International Economics - - Trade
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