According to the Bazaar hypothesis vertical integration in production is falling because a growing amount of value creation is being transferred to the final stages of production close to the customer, where production is less labour intensive and firms are better placed to withstand international low wage competition. The bazaar hypothesis does not claim that value creation in exports is slumping, but that growing quantities of materials are being channelled through companies relative to value creation, which is inflating export volumes. This hypothesis developed in the course of the lively debate surrounding the bestselling book Ist Deutschland noch zu retten? Hans-Werner Sinn first employed this term himself on 15 November 2003 in his speech (Deutschland-Rede) at the Schloss Neuhardenberg Foundation.
In Die Basar-Ökonomie Sinn developed the theory of the “pathological export boom”, whereby Germany is overspecialising and transferring too much value creation to exports at the expense of the domestic market; or boosting value creation in exports at an excessively speedy rate. Since the pathological export boom may have been triggered by static wages that do not react to international low wage competition, this overspecialization reduces prosperity.
Articles in refereed journals
"The Pathological Export Boom and the Bazaar Effect. How to Solve the German Puzzle", The World Economy 29 (9), 2006, pp. 1157-1175; (Download, 299 KB); CESifo Working Paper No. 1708, April 2006; (Download, 190 KB).
"Foreign Direct Investment, Political Resentment and the Privatization Process in Eastern Europe" (together with A. Weichenrieder), Economic Policy 24, 1997, pp. 179-210; (Download, 1.2 MB); CESifo Working Paper No. 129, 1997.
Short Policy Contributions and Newspaper Articles
"Pathological Export Boom and the Bazaar Effect", Leverhulme Centre for Research (Newsletter Winter 2006), February 15th, 2006.
"Germany's Pathological Export Boom“ (ref. Project Syndicate October 2005), Les Echos (Mali), The Australian Financial Review (Australia), The Financial Express (India), The Financial News (South Korea), The Edge (Malaysia), The Straits Times (Singapore), Taipei Times (Taiwan), The Nation (Thailand), Kazakhstan Monitor and Kapital (Kazakhstan), L´Echo (Belgium), Financial Mirror (Cyprus), Borsen (Denmark), Aripaev (Estonia), Vilaggazdasag (Hungary), Logos Press (Moldavia), Diario Economico (Portugal), Dilema Veche (Rumania), Sme (Slowakei), L´Agefi (Switzerland), Al Eqtisadiah (Saudi Arabia), Aripaev (Estonia).
Ifo Viewpoint No. 152: World Champion Capital Exporter, Mar 12, 2014.
Ifo Viewpoint No. 107: Germany’s Wrong Business Model, Jul 1, 2009.
Ifo Viewpoint No. 65: Pathological Export Boom and Bazaar Effect, May 4, 2005.
Ifo Viewpoint No. 57: The Export Puzzle, Nov 10, 2004.
Ifo Viewpoint No. 50: Bazaar Economy, Dec 18, 2003.