Falling costs of coordination and communication have allowed firms in rich countries to fragment their production process and offshore an increasing share of the value chain to low-wage countries. Popular discussions about the aggregate impact of this phenomenon on rich countries have stressed...

The decline in the costs of multinational production (MP) has led some countries to specialize in innovation and others to specialize in production. To study the aggregate and distributional implications of this phenomenon, we develop a quantifiable general equilibrium model of trade and MP....