It is often argued in the popular debate on globalization that increasing fragmentation of production will lead to reductions in wages for low-skilled workers in developed countries. This claim has been substantiated by empirical research which finds that, on average, fragmentation can reduce the relative wage of low-skilled workers. However, trade theory is not as clear-cut on this issue. In this paper, we investigate this issue using micro data for Germany. We find that the effect of fragmentation on workers depends on the skill group of workers, but also on the skill intensity of the industry in which the worker is located.
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