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Trade in Value‐Added and the Welfare Gains of International Fragmentation

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  • Arnold Njike

    (UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

ABSTRACT This study examines the overall impact of international production fragmentation on the welfare gains from trade. Using a novel model that accounts for shifts in preferences between local and foreign goods and distinguishes between intermediate and final goods trade, we gain a more nuanced understanding of how fragmentation shapes these welfare gains. Our findings challenge earlier estimates, showing that international fragmentation contributes around 20% to trade‐related welfare gains, a significantly smaller impact than previously believed. This result highlights the importance of considering changing consumer preferences, which can reduce the projected advantages of global supply chain integration.

Suggested Citation

  • Arnold Njike, 2025. "Trade in Value‐Added and the Welfare Gains of International Fragmentation," Post-Print hal-05346427, HAL.
    • Handle: RePEc:hal:journl:hal-05346427
    DOI: 10.1111/roie.70012
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