Week 9: Globalisation, Growth and Development Flashcards
What can be an alternative driver of convergence rather than substituting prerequisites?
-Globalization
What is Globalization?
-Reduction in barriers between international markets
facilitating cross-border exchange of:
- Goods and services (trade)
- Factors of production (capital, labour)
- Technology (ideas)
Consequences of globalization?
-Growth in international flows: trade, factors of production
-Market integration
-price (wage) convergence
Globalization in 1850-1914?
Unprecedented growth in trade, migration, and capital flows
How were capital flows between 1815-1914
-volatile
Why 1850 were there this growth?
-sharp decline in transportation costs
Examples of decline in transportation costs in 1850?
Steamships: river in 1807, trans-Atlantic 1838, bulk shipping from 1860s
Transport innovations?
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
Policy that supported globalization?
-Britain : repeal corn laws , shift to free trade
-MFN (most favoured nation) clauses
-Gold Standard
How do MFN (most favoured nation) clauses work?
-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
Impacts of globalization?
-H-O models
-trade driven by COMPARITIVE ADVANTAGE
-comparative advantage depends on factor endowments
-economies specialize in production using abundant factors
What does the H-O model predict?
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
IF land is abundant what are rents?
-low
Examples of H-O?
-Grain Invasion
-Grain from US, Canada floods European markets
-Impact on food prices, living costs, real wages
What contribute to convergence in wages outside of OH model?
-Immigration, in response to initial high wages in U.S
-capital flows, borrowing costs converge
Outliers to wage convergence and growth in Europe?
-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
How did socialists in Europe view Globalization?
pro-free trade (German Socialist Congress 1899)
Free trade → more demand for industrial output and cheap bread
How did American labour view globalization?
Backlash against globalization brings demand for introduction of immigration restrictions
Literacy test introduced 1917
How did European Landowners view globalization?
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
How does labour market protection link to free trade?
-negatively related
What did Huberman say about globalization and welfare state?
-labour compact’ gave workers reason to support free trade as it offered (some) protection from external risk
Globalization main points?
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
Example of shipping and railroad innovation?
-suez canal (shorter route from Asia and Europe)
How did railroads effect America?
Integral to national and regional integration,
-created a unified national market.
