The Bazaar Effect, Unbundling of Comparative Advantage, and Migration

Wilhelm Kohler

No 1932, CESifo Working Paper Series from CESifo

Abstract: Germany exhibits a strong reduction in domestic manufacturing production depth (bazaar effect). I argue that this reflects an unbundling of comparative advantage. Using a model where Ricardian plus Heckscher-Ohlin-type comparative advantage relates to fragments of production, I compare a trading equilibrium where all fragments are located within a country with an equilibrium where input sub-bundles may be traded (offshoring). The model allows for several goods and two fragments, produced with high-skilled and low-skilled labor. I address wage and welfare effects under flexible wages, and under a minimum wage. I also explore trade policy implications and compare offshoring to migration.

Keywords: comparative advantage; offshoring; outsourcing; globalization; migration (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (1)

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