The Distributional Effects of International Fragmentation

Wilhelm Kohler

Chapter 6 in European Economic Integration, WTO Membership, Immigration and Offshoring, 2014, pp 195-229 from World Scientific Publishing Co. Pte. Ltd.

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: Economic Integration; WTO Membership; Immigration; Offshoring; European Union; International Trade; Migration; Gravity; Germany; Equilibrium; Tariff Liberalization; Commercial Policy; Eastern Enlargement (search for similar items in EconPapers)
Date: 2014
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