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Kohler, Wilhelm
Year of Publication: 
Series/Report no.: 
EPRU Working Paper Series 2001-03
Economic globalization causes an increasing international fragmentation of value-added chains. A question often raised is whether such outsourcing affects domestic income distribution. The paper provides a theoretical treatment of this issue within a Heckscher-Ohlin framework. It extends beyond previous treatments by allowing for an arbitrary number of goods, factors, and fragments, and by formally specifying a fragmentation technology. It defines a margin of international fragmentation and shows how this margin shifts in response to economic globalization. Factor prices are driven by associated changes in effective prices of individual fragments of the value-added chains.
Document Type: 
Working Paper

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