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The Distributional Effects of International Fragmentation

Author

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  • Kohler Wilhelm

    (Johannes Kepler University, Linz, Austria)

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

  • Kohler Wilhelm, 2003. "The Distributional Effects of International Fragmentation," German Economic Review, De Gruyter, vol. 4(1), pages 89-120, February.
    • Handle: RePEc:bpj:germec:v:4:y:2003:i:1:p:89-120
    DOI: 10.1111/1468-0475.00074
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    Cited by:

    1. Wilhelm Kohler, 2007. "The Bazaar Effect, Unbundling of Comparative Advantage, and Migration," CESifo Working Paper Series 1932, CESifo.

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