Week 9: Globalisation, Growth and Development

Question 1

What can be an alternative driver of convergence rather than substituting prerequisites?

Answer 1

-Globalization

Question 2

What is Globalization?

Answer 2

-Reduction in barriers between international markets

facilitates cross-border exchange:

1. Goods and services (trade)
2. Factors of production (capital, labour)
3. Technology (ideas)

Question 3

Consequences of globalization?

Answer 3

-Growth in international flows: trade, factors of production

-Market integration and price (wage) convergence

Question 4

Globalization in 1850-1914?

Answer 4

Unprecedented growth in trade, migration, and capital flows​

Migration flows large even by present-day standard​

Question 5

How were capital flows between 1815-1914

Answer 5

-volatile

Question 6

Why 1850 were there this growth?

Answer 6

-sharp decline in transportation costs

Question 7

Examples of decline in transportation costs in 1850?

Answer 7

Steamships: river in 1807, trans-Atlantic 1838, bulk shipping from 1860s

Question 8

Transport innovations?

Answer 8

Long-distance trade in bulky, low value commodities possible

Refrigeration in late 19th Century allows intercontinental shipment of perishables

Shipping people: declining mortality, reduced voyage time with steam liners

(linking to communication , capital flows depend on communication)

Question 9

Policy that supported globalization?

Answer 9

-Britain : repeal corn laws (1846) , shift to free trade

-Trade agreements: MFN (most favoured nation) clauses

-Gold Standard

Question 10

How do MFN (most favoured nation) clauses work?

Answer 10

-Suppose Britain agrees to reduce tariffs on French wine under a treaty. If Britain has MFN agreements with Germany and Spain, those countries will also receive the same reduced tariff rate, even though they were not directly involved in the initial agreement.

-Bilateral agreements have multilateral consequences

Question 11

Impacts of globalization?

Answer 11

-H-O models

-trade driven by comparative advantage

-comparative advantage depends on factor endowments

-economies specialize in production using abundant factors

Question 12

What does the H-O model predict?

Answer 12

Price convergence with markets open to trade​

Wages rise, rents fall in Europe with manufacturing exports, ​

rents rise, wages fall in America with land-intensive exports​

→ Outcome: international wage (and rent) convergence​

Question 13

IF land is abundant what are rents?

Answer 13

-low

Question 14

Examples of H-O?

Answer 14

-Grain Invasion

-Grain from US, Canada floods European markets​

-Impact on food prices, living costs, real wages​

Question 15

What contribute to convergence in wages outside of OH model?

Answer 15

-Immigration, in response to initial high wages in U.S

-capital flows, borrowing costs converge

Question 16

Outliers to wage convergence and growth in Europe?

Answer 16

-Spain, still agriculture heavy

Europe has Limited catch-up to US, technology advancing in US in a way that is not in Europe late 19th century (working against convergence)

Question 17

How did socialists in Europe view Globalization?

Answer 17

pro-free trade (German Socialist Congress 1899)​

Free trade → more demand for industrial output and cheap bread ​

Second in particular of benefit to the working classes​

Question 18

How did American labour view globalization?

Answer 18

Backlash against globalization brings demand for introduction of immigration restrictions​

Literacy test introduced 1917​

National origin quotas in 1921

Question 19

How did European Landowners view globalization?

Answer 19

Demand protection for the price of their output​

Landowners have political importance in many continental economies​

Grain Invasion leads to agricultural tariffs on the continent​

Question 20

How does labour market protection link to free trade?

Answer 20

-positively related

Question 21

What did Huberman say about globalization and welfare state?

Answer 21

-labour compact’ gave workers reason to support free trade as it offered (some) protection from external risk

Question 22

Globalization main points?

Answer 22

Large increases in trade, migration, and capital flows 1870-1913​

Commodity price convergence - reduced cost of living for European workers​

Migration and trade led to wage convergence within Europe, some convergence with US​

US industry maintains extensive tariff protection throughout

​

Question 23

Example of shipping and railroad innovation?

Answer 23

-suez canal (shorter route from Asia and Europe)

Question 24

How did railroads effect America?

Answer 24

Integral to national and regional integration, particularly in the United States, where they created a unified national market.

Question 25

What broke the ‘Tyranny of Distance’?

Answer 25

Advances in transportation reduced the challenges of geographic separation, bringing even distant regions like Asia and Britain closer in terms of trade and economic interaction.

Question 26

How did commodity market integration increase support living standards?

Answer 26

better resource allocation, increased productivity, and potentially higher incomes

Question 27

Overall impact of living standards from globalization?

Answer 27

-Lower prices and increased trade boosted living standards for many groups.

-Gains were not universal; specific groups, such as unskilled labor in Europe, benefitted disproportionately.

• landowners in Europe, faced significant losses.

Question 28

How did wage converge in relation to productivity?

Answer 28

Real wages converged more quickly than productivity (GDP per worker-hour).

Question 29

Trade offs from globalization?

Answer 29

Income inequality decreased in catching-up countries (e.g., poorer European nations) as wages rose, but it increased in wealthy countries where the influx of cheap labor widened wage disparities.