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The Bazaar Effect, Unbundling of Comparative Advantage, and Migration

  • Wilhelm Kohler
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    Germany exhibits a strong reduction in domestic manufacturing production depth (bazaar effect). I argue that this reflects an unbundling of comparative advantage. Using a model where Ricardian plus Heckscher-Ohlin-type comparative advantage relates to fragments of production, I compare a trading equilibrium where all fragments are located within a country with an equilibrium where input sub-bundles may be traded (offshoring). The model allows for several goods and two fragments, produced with high-skilled and low-skilled labor. I address wage and welfare effects under flexible wages, and under a minimum wage. I also explore trade policy implications and compare offshoring to migration.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-02/cesifo1_wp1932.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1932.

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    Date of creation: 2007
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    Handle: RePEc:ces:ceswps:_1932
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    24. repec:hrv:faseco:4784029 is not listed on IDEAS
    25. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
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    28. Deardorff, Alan V., 2005. "Ricardian comparative advantage with intermediate inputs," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 11-34, March.
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    30. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, March.
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