The Distributional Effects of International Fragmentation

Posted: 19 May 2003

See all articles by Wilhelm Kohler

Wilhelm Kohler

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

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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

Kohler, Wilhelm K., The Distributional Effects of International Fragmentation. Available at SSRN: https://ssrn.com/abstract=388503

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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