Course: Economic
Globalization
Year: 2023-2024
,Table of contents
CHAPTER 1 – What is globalization?...................................................................................4
What is globalization?..................................................................................................................4
Is globalization good?...................................................................................................................5
Who trades with whom?..............................................................................................................7
So, what’s next?...........................................................................................................................9
CHAPTER 2 – Classical models of trade.............................................................................11
Absolute advantage....................................................................................................................11
Comparative advantage..............................................................................................................13
How are wages and prices determined?.....................................................................................15
Misconceptions about comparative advantage..........................................................................19
Comparative advantage in real life.............................................................................................20
Should Nigeria strive for self-sufficiency in food?.......................................................................22
To summarize.............................................................................................................................23
CHAPTER 3 – Neoclassical models of trade.......................................................................24
Labour and trade........................................................................................................................24
An economy with multiple factors..............................................................................................25
Heckscher-Ohlin model...............................................................................................................27
H-O in real life............................................................................................................................29
If not trade, what is to blame?...................................................................................................29
CHAPTER 4 – Modern Trade Theory..................................................................................31
Why do we need more trade theory?.........................................................................................31
So why do countries trade things they already have?.................................................................32
Internal economies of scale........................................................................................................33
External economies of scale.......................................................................................................36
Firm heterogeneity and trade costs............................................................................................37
Dumping.....................................................................................................................................39
CHAPTER 5 – FDI and MNEs..............................................................................................40
5.1 The basics of FDI and MNE....................................................................................................40
5.2 Ownership, location, internalization.....................................................................................43
5.3 Impact on welfare.................................................................................................................45
CHAPTER 6 – MIGRATION.................................................................................................47
Evolution and composition.........................................................................................................47
The migration decision and location choice................................................................................50
, Impact of immigration on the destination..................................................................................57
Impact on the origin country......................................................................................................60
CHAPTER 7 – The instruments of trade policy...................................................................61
How does government intervene in trade?................................................................................61
Supply of exports // demand for imports...................................................................................62
The effects of tariffs: small country case.....................................................................................63
The effect of tariffs – large countries..........................................................................................65
Measuring the extent of protection............................................................................................66
Welfare impact of non-tariff barriers..........................................................................................67
CHAPTER 8 – The political economy of trade policy...........................................................70
Why is there protectionism?.......................................................................................................70
The case for free trade................................................................................................................71
Arguments against free trade.....................................................................................................72
Political models of trade policy...................................................................................................80
CHAPTER 9 – Regional integration....................................................................................82
What are regional integration agreements (RIAs)?.....................................................................82
Economic integration agreements:.............................................................................................83
Static impact of trade agreements..............................................................................................85
Dynamic effects of trade agreements.........................................................................................87
Spaghetti bowl............................................................................................................................87
CHAPTER 10 – Trade and development.............................................................................91
Trade as a pathway to development..........................................................................................91
Not all trade is good...................................................................................................................93
Trade and labor standards..........................................................................................................95
Trade and the environment........................................................................................................96
Chapter 11 – GATT and the WTO......................................................................................98
What is the WTO?.......................................................................................................................98
Brief history of GATT and WTO...................................................................................................99
WTO principles.........................................................................................................................101
WTO-structure..........................................................................................................................104
Examples of WTO cases............................................................................................................106
The future of the WTO..............................................................................................................108
, CHAPTER 1 – What is globalization?
What is globalization?
Globalization refers to the increasing interconnectedness and
interdependence of the world’s markets and businesses. This process has
significant economic, political, and cultural dimensions. This leads to
greater exchange of goods, services, technology, and capital across
borders.
What is (economic) globalization?
Globalization is as old as civilization:
This definition defines globalization as anything facilitating
expanded economic interaction across different countries.
Phoenicians (1500 BC) using square-rigged sails for trade in the
Mediterranean.
European explorers reaching landmasses west of Europe, but east of
China.
Highlight that globalization has been ongoing for a very long time.
Deardorff and Stern (2002) definition:
Increase in international transactions in markets for goods, services,
and factors of production.
Growth and expanded scope of international institutions and
organizations, including both MNCs and international institutions:
UN, WB, IMF, WTO.
Globalization equals increased trade:
Key aspect of globalization is the increase in trade.
This is vital to many companies and countries worldwide.
Globalization equals increased foreign investment:
International economic relations include more than just trade in
goods and services.
Foreign direct investment has increased alongside or instead of
trade.
Globalization equals increased migration:
Increased international travel (both temporary and permanent)
contributes to globalization.
Brings diverse cultures into daily contact
Globalization equals increased political connections:
Economic globalization leads to more political connections between
countries.
Countries work together to enact trade agreements and open
borders for factor movement.
Globalization
Year: 2023-2024
,Table of contents
CHAPTER 1 – What is globalization?...................................................................................4
What is globalization?..................................................................................................................4
Is globalization good?...................................................................................................................5
Who trades with whom?..............................................................................................................7
So, what’s next?...........................................................................................................................9
CHAPTER 2 – Classical models of trade.............................................................................11
Absolute advantage....................................................................................................................11
Comparative advantage..............................................................................................................13
How are wages and prices determined?.....................................................................................15
Misconceptions about comparative advantage..........................................................................19
Comparative advantage in real life.............................................................................................20
Should Nigeria strive for self-sufficiency in food?.......................................................................22
To summarize.............................................................................................................................23
CHAPTER 3 – Neoclassical models of trade.......................................................................24
Labour and trade........................................................................................................................24
An economy with multiple factors..............................................................................................25
Heckscher-Ohlin model...............................................................................................................27
H-O in real life............................................................................................................................29
If not trade, what is to blame?...................................................................................................29
CHAPTER 4 – Modern Trade Theory..................................................................................31
Why do we need more trade theory?.........................................................................................31
So why do countries trade things they already have?.................................................................32
Internal economies of scale........................................................................................................33
External economies of scale.......................................................................................................36
Firm heterogeneity and trade costs............................................................................................37
Dumping.....................................................................................................................................39
CHAPTER 5 – FDI and MNEs..............................................................................................40
5.1 The basics of FDI and MNE....................................................................................................40
5.2 Ownership, location, internalization.....................................................................................43
5.3 Impact on welfare.................................................................................................................45
CHAPTER 6 – MIGRATION.................................................................................................47
Evolution and composition.........................................................................................................47
The migration decision and location choice................................................................................50
, Impact of immigration on the destination..................................................................................57
Impact on the origin country......................................................................................................60
CHAPTER 7 – The instruments of trade policy...................................................................61
How does government intervene in trade?................................................................................61
Supply of exports // demand for imports...................................................................................62
The effects of tariffs: small country case.....................................................................................63
The effect of tariffs – large countries..........................................................................................65
Measuring the extent of protection............................................................................................66
Welfare impact of non-tariff barriers..........................................................................................67
CHAPTER 8 – The political economy of trade policy...........................................................70
Why is there protectionism?.......................................................................................................70
The case for free trade................................................................................................................71
Arguments against free trade.....................................................................................................72
Political models of trade policy...................................................................................................80
CHAPTER 9 – Regional integration....................................................................................82
What are regional integration agreements (RIAs)?.....................................................................82
Economic integration agreements:.............................................................................................83
Static impact of trade agreements..............................................................................................85
Dynamic effects of trade agreements.........................................................................................87
Spaghetti bowl............................................................................................................................87
CHAPTER 10 – Trade and development.............................................................................91
Trade as a pathway to development..........................................................................................91
Not all trade is good...................................................................................................................93
Trade and labor standards..........................................................................................................95
Trade and the environment........................................................................................................96
Chapter 11 – GATT and the WTO......................................................................................98
What is the WTO?.......................................................................................................................98
Brief history of GATT and WTO...................................................................................................99
WTO principles.........................................................................................................................101
WTO-structure..........................................................................................................................104
Examples of WTO cases............................................................................................................106
The future of the WTO..............................................................................................................108
, CHAPTER 1 – What is globalization?
What is globalization?
Globalization refers to the increasing interconnectedness and
interdependence of the world’s markets and businesses. This process has
significant economic, political, and cultural dimensions. This leads to
greater exchange of goods, services, technology, and capital across
borders.
What is (economic) globalization?
Globalization is as old as civilization:
This definition defines globalization as anything facilitating
expanded economic interaction across different countries.
Phoenicians (1500 BC) using square-rigged sails for trade in the
Mediterranean.
European explorers reaching landmasses west of Europe, but east of
China.
Highlight that globalization has been ongoing for a very long time.
Deardorff and Stern (2002) definition:
Increase in international transactions in markets for goods, services,
and factors of production.
Growth and expanded scope of international institutions and
organizations, including both MNCs and international institutions:
UN, WB, IMF, WTO.
Globalization equals increased trade:
Key aspect of globalization is the increase in trade.
This is vital to many companies and countries worldwide.
Globalization equals increased foreign investment:
International economic relations include more than just trade in
goods and services.
Foreign direct investment has increased alongside or instead of
trade.
Globalization equals increased migration:
Increased international travel (both temporary and permanent)
contributes to globalization.
Brings diverse cultures into daily contact
Globalization equals increased political connections:
Economic globalization leads to more political connections between
countries.
Countries work together to enact trade agreements and open
borders for factor movement.
