IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v12y2004i5p793-816.html
   My bibliography  Save this article

Aspects of International Fragmentation

Author

Listed:
  • Wilhelm Kohler

Abstract

The paper uses a specific‐factors framework to address efficiency and distributional implications of international fragmentation which is driven by a low foreign wage rate. Focusing on the cost‐savings linkage between fragmentation and labor demand in the remaining domestic activities, the author establishes a fragmentation surplus. If capital is an indivisible asset specific to the fragment produced abroad, 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 domestic production to fragmentation is modeled as a two‐stage game. In stage one, firms locate indivisible assets at home or abroad; in stage two they choose optimal employment. The share of fragmented firms is endogenously determined. The paper explores conditions under which outsourcing is beneficial for the domestic economy.

Suggested Citation

  • Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
    • Handle: RePEc:bla:reviec:v:12:y:2004:i:5:p:793-816
    DOI: 10.1111/j.1467-9396.2004.00482.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9396.2004.00482.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9396.2004.00482.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    2. David L. Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 79-99.
    3. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, December.
    4. Dani Rodrik, 1998. "Has Globalization Gone Too Far?," Challenge, Taylor & Francis Journals, vol. 41(2), pages 81-94, March.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wilhelm Kohler, 2003. "The Distributional Effects of International Fragmentation," German Economic Review, Verein für Socialpolitik, vol. 4(1), pages 89-120, February.
    2. Markusen, James R., 2013. "Expansion of trade at the extensive margin: A general gains-from-trade result and illustrative examples," Journal of International Economics, Elsevier, vol. 89(1), pages 262-270.
    3. Markusen, James R. & Venables, Anthony J., 2007. "Interacting factor endowments and trade costs: A multi-country, multi-good approach to trade theory," Journal of International Economics, Elsevier, vol. 73(2), pages 333-354, November.
    4. Wilhelm Kohler, 2002. "The Distributional Effects of International Fragmentation," Economics working papers 2002_01, Department of Economics, Johannes Kepler University Linz, Austria.
    5. Baldwin, Richard & Venables, Anthony J., 2013. "Spiders and snakes: Offshoring and agglomeration in the global economy," Journal of International Economics, Elsevier, vol. 90(2), pages 245-254.
    6. Nowak, Jean-Jacques & Petit, Sylvain & Sahli, Mondher, 2010. "Tourism and Globalization: The International Division of Tourism Production," MPRA Paper 75083, University Library of Munich, Germany.
    7. Miraskari , Seyed Reza & Tayebi , Seyed Komail & Vaez Barzani , Mohammad, 2013. "An Analysis of International Outsourcing in Iran-China Trade Relations," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 8(1), pages 109-139, January.
    8. Venables, Anthony & Markusen, James, 2005. "A Multi-Country Approach to Factor-Proportions Trade and Trade Costs," CEPR Discussion Papers 4872, C.E.P.R. Discussion Papers.
    9. Hartmut Egger & Peter Egger, 2005. "The Determinants of EU Processing Trade," The World Economy, Wiley Blackwell, vol. 28(2), pages 147-168, February.
    10. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    11. Egger, Hartmut & Falkinger, Josef, 2003. "The distributional effects of international outsourcing in a 2 x 2 production model," The North American Journal of Economics and Finance, Elsevier, vol. 14(2), pages 189-206, August.
    12. Wilhelm Kohler, 2002. "Aspects of International Fragmentation," Economics working papers 2002-08, Department of Economics, Johannes Kepler University Linz, Austria.
    13. Marek Rojíček, 2010. "Konkurenceschopnost obchodu ČR v procesu globalizace [Competitiveness of the Trade of the Czech Republic in the Process of Globalisation]," Politická ekonomie, Prague University of Economics and Business, vol. 2010(2), pages 147-165.
    14. Witada Anukoonwattaka, 2007. "Outsourcing and International Production of a Multinational: A Theoretical Model and Empirical Evidence from Toyota, Thailand," DEGIT Conference Papers c012_045, DEGIT, Dynamics, Economic Growth, and International Trade.
    15. Holger Görg & Michael Henry & Eric Strobl & Frank Walsh, 2009. "Multinational companies, backward linkages, and labour demand elasticities," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 332-348, February.
    16. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2021. "Export-Platform Foreign Direct Investment," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 6, pages 111-130, World Scientific Publishing Co. Pte. Ltd..
    17. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    18. Berthold, Norbert & Stettes, Oliver, 2000. "Globalisierung und Strukturwandel - droht das Ende des Sozialstaates," Discussion Paper Series 35, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    19. Yu Zheng, 2011. "Credibility and Flexibility: Political Institutions, Governance, and Foreign Direct Investment," International Interactions, Taylor & Francis Journals, vol. 37(3), pages 293-319, July.
    20. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:12:y:2004:i:5:p:793-816. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.