The Distributional Effects of International Fragmentation
Johannes Kepler Univ. Linz, Department of Economics, Working Paper No. 0201
40 Pages Posted: 13 May 2002
There are 2 versions of this paper
The Distributional Effects of International Fragmentation
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: Suggested Citation
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