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The Nordic Model and the Challenge from Global Value Chains

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Document pages: 18 pages

Abstract: With the increasing ease of communication and transportation, the falling costs of processing and transferring information, and the major political and societal changes that have occurred in recent years, the link between economies of scale and the geographic concentration of production has weakened. It has become feasible and profitable to disperse global value chains in time and space at a fine level of aggregation. This trade-intasks (Grossman and Rossi-Hansberg, 2008) or second unbundling (Baldwin, 2006; 2009) is among the most important features of modern globalization. Basic economic theory suggest that deepening specialization brings about aggregate benefits. As agents and institutions involved do not necessarily fully redistribute these benefits, there are bound to be both winners and losers. Therefore, current high-income countries are justly concerned about the sustainability of their prevailing standards of living.

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