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The Distributional Effects of International Fragmentation

Wilhelm Kohler ()
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Wilhelm Kohler: Department of Economics, Johannes Kepler University Linz, Austria, http://www.econ.jku.at/

Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

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.

JEL-codes: D33 F11 F15 F23 (search for similar items in EconPapers)
Date: 2002-04
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2002_01

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