International Vertical Specialization, Imperfect Competition and Welfare
This paper looks at the impact of international vertical specialization when the final good industry is imperfectly competitive. Final goods are assembled out of different fragments. In the absence of international vertical specialization all fragments required to produce a given final good must be produced in the same country. International vertical specialization unambiguously reduces the costs of production of all final good producers, albeit not necessarily in the same proportion. If the cost of production of a less efficient producer is reduced to a lesser extent than that of a more efficient producer, vertical specialization may lead to exit in the final good industry. This anti-competitive effect may be strong enough that international vertical specialization leads to a Pareto inferior outcome. On the other hand, we can characterize two sets of policies, which, combined with vertical specialization, are Pareto improving compared to autarky regardless of consumer preferences and of the form of competition in the final good industry.
|Date of creation:||01 Dec 2003|
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- Masahisa Fujita & Jacques-François Thisse, 2006.
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- Fujita, Masahisa & Thisse, Jacques-François, 2003. "Globalization and the Evolution of the Supply Chain: Who Gains and Who Loses?," CEPR Discussion Papers 4152, C.E.P.R. Discussion Papers.
- Masahisa Fujita & Jacques-François Thisse, 2006. "Globalization and the evoluton of the supply chain: WHO gains and who loses?," Post-Print halshs-00754139, HAL.
- Fujita, Masahisa & Thisse, Jacques-Francois, 2004. "Globalization and the Evolution of the Supply Chain: who gains and who loses?," IDE Discussion Papers 5, Institute of Developing Economies, Japan External Trade Organization(JETRO).
- Masahisa Fujita & Jacques-Francois Thisse, 2003. "Globalization and the Evolution of the Supply Chain: who gains and who loses?," KIER Working Papers 571, Kyoto University, Institute of Economic Research.
- FUJITA, Masahisa & THISSE, Jacques, 2003. "Globalization and the evolution of the supply chain: who gains and who loses ?," CORE Discussion Papers 2003074, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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