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    Emma Cabalé
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    Globalization refers to the increasing internationalization of markets and integration of economies via trade and financial flows. Key aspects of globalization include the growing volume of world trade, higher trade openness indices of countries, and falling costs of transportation that have reduced price gaps between domestic and international markets. Countries tend to trade most with geographic neighbors due to lower transportation costs. While economic globalization has led to overall gains from increased efficiency and innovation, it has also negatively impacted some workers and regions by eliminating less competitive jobs and firms.

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    Globalization refers to the increasing internationalization of markets and integration of economies via trade and financial flows. Key aspects of globalization include the growing volume of world trade, higher trade openness indices of countries, and falling costs of transportation that have reduced price gaps between domestic and international markets. Countries tend to trade most with geographic neighbors due to lower transportation costs. While economic globalization has led to overall gains from increased efficiency and innovation, it has also negatively impacted some workers and regions by eliminating less competitive jobs and firms.

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    4 views1 page

    Lecture 1

    Uploaded by

    Emma Cabalé
    Globalization refers to the increasing internationalization of markets and integration of economies via trade and financial flows. Key aspects of globalization include the growing volume of world trade, higher trade openness indices of countries, and falling costs of transportation that have reduced price gaps between domestic and international markets. Countries tend to trade most with geographic neighbors due to lower transportation costs. While economic globalization has led to overall gains from increased efficiency and innovation, it has also negatively impacted some workers and regions by eliminating less competitive jobs and firms.

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    of 1

    TRADE AND

    GLOBALIZATION. A
    HISTORICAL PERSPECTIVE
    What is globalization • Larger is the country’s GDP, the greater is the
    value of trade
    • Economic globalization: Increasing • Important to notice that geographical proximity is
    internationalization of markets for goods and important (transportation costs)
    services, the means of production, financial o Regions close to national borders are
    systems, competition, corporations, technology more likely to export
    and industries. (Manual on Statistics of o Intra-country trade is larger than cross-
    International Trade in Services) border trade
    o Thus, globalization increases flows of
    goods/services… between countries, A historical perspective
    across national borders, longer distances
    o Implies
    ▪ Global vs national markets
    ▪ Enabling more complex and
    efficient production

    Trade and globalization (how to measure globalization)

    • Volume of world trade has been growing


    exponentially over past two centuries →
    importance of international trade has been
    increasing
    • Trade openness index = (exports + imports)/GDP
    → the higher the index, the larger the influence of National economy and globalization (economic
    trade on domestic economic activities consequences of globalization: -gains from international
    • The price gap: the difference between the trade, -trade, jobs and wages)
    domestic price of exported product and its price • Clear statistical association between trade and
    abroad economic growth.
    o High price gap: world where trade is • Several channels
    expensive and globalization is limited o Increasing competition in the domestic
    o Low price gap: globalized world where markets drives away less efficient firms,
    trade is cheap reallocating their resources to for more
    • Augmentation of globalization can be explained efficient use
    thanks to: o Global markets allow firms achieve
    o Falling costs of transportation economies of scale, the same output can
    o Reduction of trade protection be produced more efficiently
    Patterns of Modern Global Trade (What do countries o Learning, innovation and international
    trade? With who?) transfer of technologies enhance the
    process of technical change driving long-
    • In goods, growth is mostly driven by term growth
    manufacturing export • Frankel and Romer in 1999 found an strong
    o Agricultural products until the 80s then positive effect of trade on income
    industrial production • Important to keep in mind that even though
    o Trade in services has been rapidly trade can generate efficiency gains, not everyone
    growing: benefit from those gains to the same degree (and
    • Major trade groups some actually lose) Autor, Dorn and Hanson
    o Triade (2013)
    o South-South trade is gaining in • Note also that job losses in some regions
    importance subsidize new jobs in other parts of countries
    • Countries tend to trade with their neighbors Magyari (2017) Negative impact of liberalization
    • Gravity model: (A facteur exogène) on poverty in India Topalova (2010)

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