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Title:Cost competition, fragmentation and globalization PDF Logo
Authors:Burda, Michael C.
Dluhosch, Barbara
Issue Date:2001
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2001,40
Abstract:This paper proposes a model in which the removal of barriers to trade and factor mobility is associated with endogenous fragmentation of the value-added chain. Fragmentation is the outcome of cost competition - the profit-maximizing choice of cost structure by monopolistically competitive firms. An expansion of the integrated trading area can induce globalization not only in the horizontal dimension associated with love-of-variety preferences, but also vertically as firms vary specialization of production stages. While increased trade is likely to induce fragmentation when the number of firms is fixed, free entry can either reverse or intensify this result.
Subjects:International Trade
Organization of Production
Technology Choice
Division of Labor
JEL:F10
L23
O33
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10049826
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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