The financial crisis of 2008 not only started the Great Recession, but also set off fundamental changes in production processes, government fiscal practices, and housing. Technological progress has enabled firms to outsource and offshore parts of the production process, leading to a fragmentation of global value chains. We briefly discuss this “second unbundling,” global versus regional fragmentation and some of the consequences that became visible during the Great Recession’s trade collapse. We discuss the consequences for some local clusters, both from a theoretical and empirical perspective, and some consequences for government fiscal health and housing from an American perspective.

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