[10] This is contrary to proponents of localisation, who believe that any increase in susceptibility to domestic shocks are offset by an increase in resilience to external shocks. While the size of the economic costs vary across studies, one message is clear: the deeper the fragmentation, the larger the costs.
[11] For example, if the fragmentation is relatively minor and/or offset by trade diversion, the adjustment costs are relatively small. However, if there is a severe fragmentation that also affects technological diffusion, the loss of economic output is substantial at between 8 to 12 percent in some countries.