International Fragmentation: Boon or Bane for Domestic Employment?

Hartmut Egger () and Udo Kreickemeier

Chapter 9 in International Trade and Labor Markets:Welfare, Inequality and Unemployment, 2017, pp 237-263 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we introduce the fairness approach to efficiency wages into a standard model of international fragmentation. This gives us a theoretical framework in which wage inequality and unemployment rates are co-determined and therefore the public concern can be addressed that international fragmentation and outsourcing to low wage countries lead to domestic job-losses. We develop a novel diagrammatic tool to illustrate the main labor market effects of international fragmentation. We also explore how preferences for fair wages and the size of unemployment benefits govern the employment effects of outsourcing and critically assess the role of political intervention that aims to reduce unemployment benefits under internationally fragmented production.

Keywords: International Trade; Inequality; Labor Markets; Unemployment; Offshoring (search for similar items in EconPapers)
JEL-codes: J01 (search for similar items in EconPapers)
Date: 2017
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Related works:
Journal Article: International fragmentation: Boon or bane for domestic employment (2008)
Working Paper: International Fragmentation: Boon or Bane for Domestic Employment? (2005)
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