The Distributional Effects of International Fragmentation
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.
© 2019 by Walter de Gruyter Berlin/Boston
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- Economic Development, Trade and Wages
- Reform Unleashed Korean Growth
- Beyond Flying Geese: The Expansion of East Asia’s Electronics Trade
- Walrasian General Equilibrium Allocations and Dynamics in Two-Sector Growth Models
- The Distributional Effects of International Fragmentation
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Articles in the same Issue
- Economic Development, Trade and Wages
- Reform Unleashed Korean Growth
- Beyond Flying Geese: The Expansion of East Asia’s Electronics Trade
- Walrasian General Equilibrium Allocations and Dynamics in Two-Sector Growth Models
- The Distributional Effects of International Fragmentation
- Inflationary Financing of Government Expenditure in an Endogenous Growth Model
