The Distributional Effects of International Fragmentation

Johannes Kepler Univ. Linz, Department of Economics, Working Paper No. 0201

40 Pages Posted: 13 May 2002

See all articles by Wilhelm Kohler

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2002

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.

Keywords: International trade, International Fragmentation, Outsourcing, Income distribution

JEL Classification: D33, F11, F15, F23

Suggested Citation

Kohler, Wilhelm K., The Distributional Effects of International Fragmentation (April 2002). Johannes Kepler Univ. Linz, Department of Economics, Working Paper No. 0201, Available at SSRN: https://ssrn.com/abstract=309719 or http://dx.doi.org/10.2139/ssrn.309719

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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