THE BAZAAR EFFECT, UNBUNDLING OFCOMPARATIVE ADVANTAGE, AND MIGRATION

Germany exhibits a strong reduction in domestic manufacturing production depth (bazaareffect). I argue that this reflects an unbundling of comparative advantage. Using a modelwhere Ricardian plus Heckscher-Ohlin-type comparative advantage relates to fragments ofproduction, I compare a trading equilibrium where all fragments are located within a countrywith an equilibrium where input sub-bundles may be traded (offshoring). The model allowsfor several goods and two fragments, produced with high-skilled and low-skilled labor. Iaddress wage and welfare effects under flexible wages, and under a minimum wage...