1 / 26

Globalization Thematic Group - PowerPoint PPT Presentation

  • Uploaded on

Globalization Thematic Group. Globalization. What is globalization? Driving forces Measures Effects Response: Policies and Institutions. What is Globalization ?. The increased freedom and capacity of individuals and firms to:

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about ' Globalization Thematic Group' - julio

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript


Thematic Group


  • What is globalization?

  • Driving forces

  • Measures

  • Effects

  • Response: Policies and Institutions

What is Globalization ?

  • The increased freedom and capacity of individuals and firms to:

    • undertake economic transactions with residents of other countries

    • operate on a global scale

Driving Forces of Globalization

  • A reduction in official obstacles/barriers for conducting business with foreigners

  • Fast reduction and convergence of transaction costs associated with doing this business

Examples of price decline in

transport and communication

  • Between the early 1980's and 1996 real sea freight costs fell 70%.

  • Real air freight costs have fallen 3-4% a year over a long period.

  • Real costs of international phone calls fell 4% a year in the developing countries in the 1990's and 2% a year in the industrial countries.

Cost of a 3-Minute Telephone Call,

New York to London

(Constant 1990, U.S. $)


Examples of Innovation Driving

Improved Quality/ Lower Cost


easier tracking

less pilferage/losses

faster port services

Electronic data

easier tracking

faster delivery


(better scheduling)

just-in-time inventory


Fiber optics

Lower costs

Average Air Transport Revenue

per Passengers Mile

(in 1990 US dollars)

Average Tariffs

in Industrial Countries

Average mfn import tariffs in large developing countries
Average MFN Import Tariffs inLarge Developing Countries

Measures of Globalization

  • Trade integration

  • Financial integration

  • Global production networks

Trade to GDP Ratios Rose Dramatically over the Last Decade(Export plus import as a percentage of GDP)



Developing countries

High-income OECD

Trade to PPP GDP, 1986 and 1996(percent)

Net private flows to developing countries 1990 96 in billions of us
Net Private Flows to Developing Countries, 1990-96(in billions of US$)

US$ billions

Gross private capital flows as % of PPP GDP,1986 and 1996

Developing countries and foreign direct investment filtering for low fdi to gdp ratios 1990 94
Developing Countries and Foreign Direct Investment:Filtering for low FDI to GDP ratios, 1990-94

Number of countries

of which

Global production networks
Global Production Networks

  • Local Firms

  • Low Labor Cost

  • Local Knowledge

  • Domestic Distribution

  • MNEs

  • Proprietary Technology

  • Management Know-How

  • Global Brands

  • Global Distribution

  • Scale

  • Direct Ownership

  • Joint Venture

  • Licensing

  • Franchising

  • Supplier Agreement

Special Characteristics of GPNs

  • Many studies have shown that firms which engage in global production enjoy unique, difficult to replicate assets--usually technology or differentiation

  • Many studies have also shown that foreign firms usually pay higher wages, have higher productivity, and greater export orientation--their difficult to replicate assets enable that

  • Certain parts of the world have become magnets for GPN in recent years--the Mexico-US. border; Guandong, adjoining Hong Kong; parts of Poland; parts of Malaysia; the Bombay and Bangalore region in India--this is where growth rates are often hitting 10% a year--and where the upgrading to higher value-added activities is occurring most rapidly

Share of mne affiliate production in world manufacturing output
Share of MNE Affiliate Production inWorld Manufacturing Output


Effects of Globalization

  • Growth

  • Adjustment costs and inequality

Openness and Growth

Adam Smith


Sachs & Warner


Ben David


Sebastian Edwards


  • Coastal regions grew faster--cheaper to transport by water and engage in division of labor

  • After adjusting for PCI and other factors, open economies grew 2-5% faster than slow economies

  • About 7-8 papers on the issue of convergence and its relation to growth

  • * In general, no convergence

  • * Shows that, over 1929-84: PCI in 48 US states converged systematically to that in NY state

  • * States that had half the average US income in 1929 grew 1% faster than the average. NY state (richest) grew about 1% slower than average, at 0.7%

  • * EU early years--little K&L flows--saw systematic convergence; half-life of the income gap to the average country fell from 75 years in 1900-1933 to 13 years in 1959-68

  • Using trade policy indicators in study of 93 countries finds that openness induces faster total factor productivity growth.

Adjustment costs and inequality
Adjustment costs and inequality

  • Workers in protected sectors of the economy may lose their jobs as grade liberalization proceeds

  • Wage inequality may increase as a result of diffusion of more capital/science-based production that favor skilled over unskilled labor

Financial misery index since july 2 1997 mean of changes in currency stock market interest rates
Financial Misery Index since July 2, 1997(mean of changes in currency, stock market, interest rates)

Response to Globalization:


  • Macroeconomic stability

  • Liberalisation of trade / prices / factor markets / FDI

  • Privatization

  • Orderly liberalization of capital flows

  • Better access to international markets / technology / infrastructure

  • Safety nets to ease adjustment costs

Response to Globalization:


  • Efficient public administration

  • Promote and enhance competition

  • Enforcement of rights / contracts

  • Regulatory framework for private provision of infrastructures

  • Institutions to facilitate the adoption of standards and norms

  • Sound financial systems