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The Distributional Effects of International Fragmentation

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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

  • Wilhelm Kohler, 2002. "The Distributional Effects of International Fragmentation," Economics working papers 2002_01, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2002_01
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    References listed on IDEAS

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    Cited by:

    1. Michel Dumont, 2006. "Foreign Outsourcing, Labour Demand and the Choice of Functional Form," Journal of Applied Economics, Taylor & Francis Journals, vol. 9(2), pages 255-273, November.
    2. Friedrich Schneider & Alexander F. Wagner & Mathias Dufour, 2003. "Satisfaction not guaranteed-Institutions and satisfaction with democracy in Western Europe," Economics working papers 2003-03, Department of Economics, Johannes Kepler University Linz, Austria.
    3. Dumont, Michel, 2004. "The Impact of International Trade with Newly Industrialised Countries on the Wages and Employment of Low-Skilled and High-Skilled Workers in the European Union," Thesis Commons bmxag, Center for Open Science.
    4. Friedrich Schneider & Alexander F. Wagner, 2003. "Tradeable permits - Ten key design issues," Economics working papers 2003-04, Department of Economics, Johannes Kepler University Linz, Austria.
    5. Friedrich Schneider & Kausik Chaudhuri & Sumana Chatterjee, 2003. "The Size and Development of the Indian Shadow Economy and a Comparison with other 18 Asian Countries: An Empirical Investigation," Economics working papers 2003-02, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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