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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
    Handle: RePEc:ces:ceswps:_1932
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    1. Deardorff, Alan V., 2005. "A trade theorist's take on skilled-labor outsourcing," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 259-271.
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    12. 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.
    13. Wilhelm Kohler, 2004. "Aspects of International Fragmentation," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 793-816, November.
    14. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Investment, Outsourcing and Relative Wages," NBER Working Papers 5121, National Bureau of Economic Research, Inc.
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    21. repec:hrv:faseco:4784029 is not listed on IDEAS
    22. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
    23. Wilhelm Kohler, 2003. "The Distributional Effects of International Fragmentation," German Economic Review, Verein für Socialpolitik, vol. 4(1), pages 89-120, February.
    24. Deardorff, A.V., 1998. "Fragmentation in Simple Trade Models," Working Papers 422, Research Seminar in International Economics, University of Michigan.
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    26. Gorg, Holger & Hanley, Aoife, 2005. "Labour demand effects of international outsourcing: Evidence from plant-level data," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 365-376.
    27. Sourafel Girma & Holger Görg, 2004. "Outsourcing, Foreign Ownership, and Productivity: Evidence from UK Establishment-level Data," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 817-832, November.
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    30. Richard B. Freeman, 2006. "People Flows in Globalization," NBER Working Papers 12315, National Bureau of Economic Research, Inc.
    31. Wilhelm Kohler, 2004. "International outsourcing and factor prices with multistage production," Economic Journal, Royal Economic Society, vol. 114(494), pages C166-C185, 03.
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    34. Kohler, Wilhelm, 2001. "A specific-factors view on outsourcing," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 31-53, March.
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