Introduction to the Global Economy. Part I Introduction Part II Firms, trade, and location Part III...
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Transcript of Introduction to the Global Economy. Part I Introduction Part II Firms, trade, and location Part III...
IntroductionIntroduction to the Global to the Global EconomyEconomy
Firm in Homeserve foreign markets / source from abroad?
Stay domestic
Export
Export or local production?
Import or local production?
ImportMultinational activity:
horizontalMultinational activity:
vertical
no
yes, serve foreign market
yes, source from abroad
exportlocal
productionimportlocal
production
Part I Part I IntroductionIntroduction
Part IIPart IIFirms, trade, Firms, trade, and locationand location
Part IIIPart IIICapital, currency,Capital, currency,and crisesand crises
Part IV Part IV Consequences Consequences of globalizationof globalization Economic consequencesEconomic consequences
Figure IFigure I Firm decision tree and book overview Firm decision tree and book overview
Data sources: Louis Henri Fournet (1998) and the website http://www.nasa.gov, ‘A baby picture of the universe Data sources: Louis Henri Fournet (1998) and the website http://www.nasa.gov, ‘A baby picture of the universe tells its age’, 11 February 2003.tells its age’, 11 February 2003.
big bang
first stars
beginning of our galaxy beginning of our solar system
beginning of the geologic erasoldest know n fossil
beginning of photosynthesisend of precambrian era
end of primary era
present time13.7 billion years
10 billion years
200 million years
200 million years
800 million years
5 billion years3.5 billion years
3 billion years
2 billion years
Figure 1.1Figure 1.1 ‘Big Bang’ and beyond ‘Big Bang’ and beyond
Figure 1.2Figure 1.2 Development of world population over the last 2,500 years Development of world population over the last 2,500 years
170 265425
7000
0
1000
2000
3000
4000
5000
6000
7000
-500 0 500 1000 1500 2000year
po
pu
latio
n (
mill
ion
)
Mongol invasions
Black death
30 years war, Ming collapse
Data sources: Data sources: Kremer (1993, Kremer (1993, table 1) and table 1) and UN Population UN Population Division World Division World Population Population Prospects: Prospects: The 2010 The 2010 Revision.Revision.
Beugelsdijk, Brakman, Garretsen, and van MarrewijkBeugelsdijk, Brakman, Garretsen, and van Marrewijk International Economics and International Economics and BusinessBusiness© Cambridge University Press, 2013© Cambridge University Press, 2013 Chapter 1 – The global economyChapter 1 – The global economy
Table 1.1 The twenty countries with highest population and population density, 2010
Rank Country Population Country Density 1 China 1,338 Macao SAR, China 19,416 2 India 1,171 Monaco 17,704 3 United States 309 Singapore 7,252 4 Indonesia 240 Hong Kong SAR, China 6,783 5 Brazil 195 Gibraltar 2,924 6 Pakistan 174 Bahrain 1,660 7 Nigeria 158 Bermuda 1,292 8 Bangladesh 149 Malta 1,291 9 Russian Fed. 142 Bangladesh 1,142 10 Japan 127 Sint Maarten (Dutch part) 1,113 11 Mexico 113 Maldives 1,053 12 Philippines 93 Channel Islands 807 13 Vietnam 87 West Bank and Gaza 690 14 Ethiopia 83 Barbados 636 15 Germany 82 Mauritius 631 16 Egypt 81 Aruba 597 17 Iran 74 St. Martin (French part) 556 18 Turkey 73 Mayotte 552 19 Thailand 69 San Marino 526 20 Congo DR 66 Korea, Rep. 504 Source: World Development Indicators Online; population in million, population density in people per square kilometer
0
2
4
6
8
10
1900 1940 1980 2020 2060 2100year
wor
ld p
opul
atio
n (b
illio
n)
Figure 1.3Figure 1.3 Development in world population, UN projection to 2100 Development in world population, UN projection to 2100
Data source: UN Population Division World Population Prospects: The 2010 Revision, medium variant Data source: UN Population Division World Population Prospects: The 2010 Revision, medium variant
Beugelsdijk, Brakman, Garretsen, and van MarrewijkBeugelsdijk, Brakman, Garretsen, and van Marrewijk International Economics and International Economics and BusinessBusiness© Cambridge University Press, 2013© Cambridge University Press, 2013 Chapter 1 – The global economyChapter 1 – The global economy
Table 1.2 Population projections, 2000–2050, the world and continents
Population Total fertility Life expectancy Median age
2010 2050 2010 2050 2010 2050 2010 2050
World 6896 9306 2.45 2.17 69.3 75.6 29.2 38.5
Africa 1022 2192 4.37 2.89 57.4 68.2 19.7 27.4
Asia 4164 5142 2.18 1.88 70.4 76.7 29.2 41.9
Latin Americaa 590 751 2.17 1.79 74.7 79.8 27.6 42.3
Europe 738 719 1.59 1.91 76.5 81.7 40.1 45.5
Northern America
345 447 2.04 2.07 79.0 83.2 37.2 40.5
Oceania 37 55 2.45 2.21 77.7 82.5 32.8 38.5 a Unless otherwise specified, the term ‘Latin America’ includes the Caribbean throughout this book.
Data source: UN Population Division, World Population Prospects: The 2010 Revision.
Notes: Population in millions, total fertility in average number of children per woman. Data for total fertility and life expectancy at birth are five-year estimates (for 2010–2015 and 2045–50). The projections for 2050 are based on the UN’s medium variant.
Figure 1.4Figure 1.4 GDP and GNP, current $, 2010 GDP and GNP, current $, 2010
10
100
1,000
10,000
100,000
10 100 1,000 10,000 100,000
GDP (current US $, bn)
GN
I (c
urre
nt U
S $
, bn
)
USA
China
Germany
Japan
Luxembourg
Data source: World Bank Development Indicators Online; data are for 167 countries; the thin line is a 45° line; Data source: World Bank Development Indicators Online; data are for 167 countries; the thin line is a 45° line; bubbles proportional to size of GDP; double logarithmic scales.bubbles proportional to size of GDP; double logarithmic scales.
Beugelsdijk, Brakman, Garretsen, and van MarrewijkBeugelsdijk, Brakman, Garretsen, and van Marrewijk International Economics and International Economics and BusinessBusiness© Cambridge University Press, 2013© Cambridge University Press, 2013 Chapter 1 – The global economyChapter 1 – The global economy
Table 1.3 The twenty most powerful economies, 2010
GDP ppp GDP GDP per capita Current int. $ Current US $ Cur. int. $ Country Billion % total billion % total Dollar Rank 1 United States 14,587 19.4 14,587 23.5 47,199 8 2 China 10,170 13.5 5,927 9.5 7,599 96 3 Japan 4,302 5.7 5,459 8.8 33,753 25 4 India 4,195 5.6 1,727 2.8 3,582 124 5 Germany 3,044 4.0 3,281 5.3 37,260 19 6 Russian Fed. 2,812 3.7 1,480 2.4 19,840 47 7 Un. Kingdom 2,234 3.0 2,249 3.6 35,904 21 8 France 2,194 2.9 2,560 4.1 33,820 24 9 Brazil 2,185 2.9 2,088 3.4 11,210 76 10 Italy 1,909 2.5 2,051 3.3 31,555 27 11 Mexico 1,644 2.2 1,035 1.7 14,498 59 12 Spain 1,478 2.0 1,407 2.3 32,070 26 13 Korea, Rep. 1,418 1.9 1,014 1.6 29,004 30 14 Canada 1,330 1.8 1,577 2.5 38,989 17 15 Turkey 1,115 1.5 734 1.2 15,321 56 16 Indonesia 1,037 1.4 707 1.1 4,325 118 17 Australia* 891 1.2 953 1.5 40,589 13 18 Iran* 872 1.2 341 0.5 11,917 73 19 Poland 755 1.0 469 0.8 19,783 48 20 Netherlands 702 0.9 779 1.3 42,255 11 Data source: World Development Indicators Online, based on information for 180 countries * based on adjusted information for 2009
100
1,000
10,000
100,000
100 1,000 10,000 100,000current US $
PP
P in
tern
atio
nal $
Figure 1.5 Figure 1.5 Correction of GDP Correction of GDP per capitaper capita for purchasing power, 2010 for purchasing power, 2010
Data source: World Bank Development Indicators Online.Data source: World Bank Development Indicators Online.
467 453566
666
7614
100
1,000
10,000
0 500 1000 1500 2000year
Wor
ld G
DP
per
cap
itaFigure 1.6 Figure 1.6 Development of worldDevelopment of world per capita per capita income over the last 2,000 years, income over the last 2,000 years, logarithmic graph logarithmic graph
Data source: Maddison Historical Statistics 1-2008 AD; 1990 international Geary-Khamis dollarsData source: Maddison Historical Statistics 1-2008 AD; 1990 international Geary-Khamis dollars
400
200
-400
-200
1 1000 15001600 1700 1800 1900 2000
% above world average(world = 100)
% below world average (country = 100)
ItalyIranIraq
Italy
UKNetherlands
Switzerland
USAAustralia
Many Many
Western
Offshoots
Australia
New
Zealand
New
Zealand
Western
Offshoots
Other
Africa
China
India
Iraq
Figure 1.8 Figure 1.8 Leaders and laggards in GDPLeaders and laggards in GDP per capita per capita: a widening perspective: a widening perspective
Data source: Maddison Historical Statistics 1-2008 AD; Data source: Maddison Historical Statistics 1-2008 AD; deviation relative to world index = 100 for positive and country deviation relative to world index = 100 for positive and country index = 100 for negative deviations.index = 100 for negative deviations.
Carrying capacity of merchant fleets, 1470-1780
0
200,000
400,000
600,000
800,000
1,000,000
1470 1570 1670 1780
Netherlands Germany Britain France Italy, Portugal, Spain
Figure 1.9Figure 1.9 Carrying capacity of European merchant fleets, 1470–1780, metric Carrying capacity of European merchant fleets, 1470–1780, metric tons tons
Data source: Maddison (2001, p. 77); absence of a bar in a year for a particular country /group indicates that no Data source: Maddison (2001, p. 77); absence of a bar in a year for a particular country /group indicates that no data are available.data are available.
Figure 1.10Figure 1.10 Two ‘waves’ of globalization, merchandise exports, per cent of GDP Two ‘waves’ of globalization, merchandise exports, per cent of GDP
Merchandise exports, % of GDP
4.6
22.8
2.5
11.3
18.7
0
5
10
15
20
25
1870 1890 1910 1930 1950 1970 1990 2010
World USA Japan
Data sources: Maddison (2001, table F-5) in constant 1990 prices, extended to 2010 using WTO International Data sources: Maddison (2001, table F-5) in constant 1990 prices, extended to 2010 using WTO International Trade Statistics and World Development Indicators Online. Trade Statistics and World Development Indicators Online.
Figure 1.11Figure 1.11 Trade and market integration Trade and market integration
price
quantity
A
Home import demand
Foreign export supply
BC
1
1
1
2
paF
pbH
paH
pbF
pc
qa qb qc
price
quantity
A
Home import demand
Foreign export supply
BC
1
1
1
2
paF
pbH
paH
pbF
pc
qa qb qc
Beugelsdijk, Brakman, Garretsen, and van MarrewijkBeugelsdijk, Brakman, Garretsen, and van Marrewijk International Economics and International Economics and BusinessBusiness© Cambridge University Press, 2013© Cambridge University Press, 2013 Chapter 1 – The global economyChapter 1 – The global economy
Table 1.5 Price convergence and declining transport cost, 1870–1913
Transport cost reductions (index)
American export routes, deflated freight cost 1869/71–1908/10 100 to 55
American east coast routes, deflated freight cost 1869/71–1911/13 100 to 55
British tramp, deflated freight cost 1869/71–1911/13 100 to 78
Commodity price convergence at selected markets (% deviation)
Liverpool–Chicago, wheat price gap 1870–1912 58 to 16
London–Cincinnati, bacon price gap 1870–1913 93 to 18
Philadelphia–London, pig iron price gap 1870–1913 85 to 19
London–Boston, wool price gap 1870–1913 59 to 28
London–Buenos Aires, hides price gap 1870–1913 28 to 9
Source: O’Rourke and Williamson (2000, table 1).
Beugelsdijk, Brakman, Garretsen, and van MarrewijkBeugelsdijk, Brakman, Garretsen, and van Marrewijk International Economics and International Economics and BusinessBusiness© Cambridge University Press, 2013© Cambridge University Press, 2013 Chapter 1 – The global economyChapter 1 – The global economy
Table 1.6 Tariffs on manufactures for selected countries, 1820–2010, per cent
1820a 1875a, b 1913a, b 1931c 1950c 2010c
Denmark 30 15–20 14 – 3 1.9 (EU)
France Prohibition 12–15 20 30 18 1.9 (EU)
Germany – 4–6 13 21 26 1.9 (EU)
Italy – 8–10 18 46 25 1.9 (EU)
Russia Prohibition 15 84 Prohibition Prohibition 6.0
Spain Prohibition 15–20 41 63 – 1.9 (EU)
Sweden Prohibition 3–5 20 21 9 1.9 (EU)
Netherlands
7 3–5 4 – 11 1.9 (EU)
UK 50 0 0 – 23 1.9 (EU)
USA 45 40 44 48 14 3.0 Sources: a Baldwin and Martin (1999, table 8); b O’Rourke and Williamson (1999, table 6.1); c World Development Indicators Online; – = data unavailable.
Figure 1.12 Figure 1.12 London external bond spread, 1870–1940, fourteen core and London external bond spread, 1870–1940, fourteen core and empire bonds empire bonds
1870 1910 1920 1930 19401890 19001880-10
-5
0
5
10
1870 1910 1920 1930 19401890 19001880-10
-5
0
5
10
Source: Based on Obstfeld and Taylor (2003); the units are percentage points.Source: Based on Obstfeld and Taylor (2003); the units are percentage points.
Figure 1.13 Figure 1.13 Foreign capital stocks; assets/world GDP, 1860–2000 Foreign capital stocks; assets/world GDP, 1860–2000
0.6
0.4
0.2
01860 1880 1900 19601920 1940 1980 2000
Foreign capital stocks; assets / world GDP0.6
0.4
0.2
01860 1880 1900 19601920 1940 1980 2000
Foreign capital stocks; assets / world GDP
Source: Based on Obstfeld and Taylor (2003).Source: Based on Obstfeld and Taylor (2003).
Figure 1.14Figure 1.14 Relative migration flows, Western Europe and Western Offshoots, Relative migration flows, Western Europe and Western Offshoots, 1870–2010, per 1,000 inhabitants 1870–2010, per 1,000 inhabitants
-2
0
2
4
6
1870-1913 1914-1949 1950-1973 1974-1998 2000-2010
Western Europe Western Offshoots
Data sources: Net migration in the period (Maddison, 2001, table 3-4) is divided by the (simple) average Data sources: Net migration in the period (Maddison, 2001, table 3-4) is divided by the (simple) average population and length of the period, normalized per 1,000 inhabitants; updated for the period 2000-2010 with population and length of the period, normalized per 1,000 inhabitants; updated for the period 2000-2010 with data from UN Population Division, Migration Section; Western Europe consists of Belgium, France, Germany, data from UN Population Division, Migration Section; Western Europe consists of Belgium, France, Germany, Italy, Netherlands, Norway, Sweden, Switzerland, and UK. Italy, Netherlands, Norway, Sweden, Switzerland, and UK.
Figure 1.15 Figure 1.15 Traditional and globalized fragmented production processes Traditional and globalized fragmented production processes
production block
country Afirm 1
inputs markets
production block 1
country Afirm 1
inputs
markets
production block 4
country Afirm 1
production block 3
country Cfirm 2
production block 2
country Bfirm 1
inputsinputs
inputs
I. traditional production process
II. globalized fragmented production process
service link
service link
service link
service link
production block
country Afirm 1
inputs markets
production block 1
country Afirm 1
inputs
markets
production block 4
country Afirm 1
production block 3
country Cfirm 2
production block 2
country Bfirm 1
inputsinputs
inputs
I. traditional production process
II. globalized fragmented production process
service link
service link
service link
service link
Figure 1.16Figure 1.16 Change in night light intensity on the Korean peninsula, 1992-2008 Change in night light intensity on the Korean peninsula, 1992-2008
Source: Henderson, Storeygard, and Weil (2011), reprinted with permission Source: Henderson, Storeygard, and Weil (2011), reprinted with permission