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The Distributional Effects of International Fragmentation

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  • Wilhelm Kohler

Abstract

Economic globalization causes an increasing international fragmentation (disintegration) of value‐added chains, whereby firms outsource components of production to foreign markets. There is a high level of concern about unwelcome distributional effects. This paper provides a theoretical treatment of this issue within a general Heckscher–Ohlin framework, allowing for an arbitrary number of goods, factors, and fragments. It shows how a fragmented production equilibrium is disturbed by lower costs of fragmentation, and it introduces the concept of effective prices of fragments to derive general results that characterize the distributional consequences of an increase in international fragmentation occurring simultaneously in several industries.

Suggested Citation

  • Wilhelm Kohler, 2003. "The Distributional Effects of International Fragmentation," German Economic Review, Verein für Socialpolitik, vol. 4(1), pages 89-120, February.
    • Handle: RePEc:bla:germec:v:4:y:2003:i:1:p:89-120
    DOI: 10.1111/1468-0475.00074
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    References listed on IDEAS

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    2. M. Magnani, 2009. "Labor share dynamics: a survey of the theory," Economics Department Working Papers 2009-EP07, Department of Economics, Parma University (Italy).
    3. Kurt Kratena, 2006. "International Outsourcing and Labour with Sector-specific Human Capital," WIFO Working Papers 272, WIFO.
    4. Wilhelm Kohler, 2007. "The Bazaar Effect, Unbundling of Comparative Advantage, and Migration," CESifo Working Paper Series 1932, CESifo.
    5. Catherine Laffineur & El Mouhoud, 2015. "The jobs at risk from globalization: the French case," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(3), pages 477-531, August.
    6. Wilhelm Kohler, 2002. "Aspects of International Fragmentation," Economics working papers 2002-08, Department of Economics, Johannes Kepler University Linz, Austria.
    7. Nathalie Chusseau & Michel Dumont & Joël Hellier, 2008. "Explaining Rising Inequality: Skill‐Biased Technical Change And North–South Trade," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 409-457, July.
    8. Nathalie Chusseau & Michel Dumont, 2012. "Growing Income Inequalities in Advanced," Working Papers hal-00993359, HAL.
    9. Baldwin, Richard & Robert-Nicoud, Frédéric, 2014. "Trade-in-goods and trade-in-tasks: An integrating framework," Journal of International Economics, Elsevier, vol. 92(1), pages 51-62.
    10. Luciano BOGGIO & Vincenzo DALL’AGLIO & Marco MAGNANI, 2010. "On Labour Shares in Recent Decades: A Survey," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 118(3), pages 283-333.
    11. bernhard Boockmann, 2014. "Offshoring Potential and Employment Dynamics," IAW Discussion Papers 111, Institut für Angewandte Wirtschaftsforschung (IAW).
    12. Wilhelm Kohler, 2003. "Factor Price Frontiers with International Fragmentation of Multistage Production," Economics working papers 2003-05, Department of Economics, Johannes Kepler University Linz, Austria.
    13. Ram Mudambi & Markus Venzin, 2010. "The Strategic Nexus of Offshoring and Outsourcing Decisions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1510-1533, December.
    14. Hartmut Egger & Peter Egger, 2005. "The Determinants of EU Processing Trade," The World Economy, Wiley Blackwell, vol. 28(2), pages 147-168, February.

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