The Bazaar Effect, Unbundling of Comparative Advantage, and Migration
Year: 2014
Type: book-chapter
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.
Author: Wilhelm Kohler
Institutions: Ifo Institute for Economic Research, University of Tübingen
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1535140855