Integration, Fragmentation and the Geography of Welfare |
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Authors: | Barbara Dluhosch |
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Institution: | Helmut Schmidt University/University FAF, D-22043 Hamburg, Germany |
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Abstract: | The welfare effects of trade integration with endogenous production technology are examined in a monopolistic competition framework. In addition to explaining industry location, trade patterns and accompanying effects on local welfare, the analysis highlights the endogenous change in the costs of supervising fragmented production when economies open up to trade. By regarding fragmentation as a skill‐intensive activity, factor proportions (rather than size) strongly affect the international distribution of gains from trade. Nevertheless, albeit not generally, for a wide range of parameter values, even a skill‐poor country can participate in the gains—despite loss of industry. |
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Keywords: | Economic integration intra-industry trade labor markets technology choice welfare economic analysis |
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