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The Distributional Effects of International Fragmentation

  • Wilhelm Kohler

    ()

    (Johannes Kepler University, Linz)

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    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. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd 2003

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    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 4 (2003)
    Issue (Month): 1 (February)
    Pages: 89-120

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    Handle: RePEc:bla:germec:v:4:y:2003:i:1:p:89-120
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    1. 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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    17. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
    18. Paul A. Samuelson, 2001. "A Ricardo-Sraffa Paradigm Comparing Gains from Trade in Inputs and Finished Goods," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1204-1214, December.
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    20. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
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