Chuleta 3 GPE
5.-Globalization
1. Globalization: a process of growing integration and interdependence of nations, characterized by the intensification of international links of all types (financial, culture,economic, political) It is a multi-faceted phenomenon, Slowbalisation: a process of growing integration, but the rate of integration is lower. Two key factors of globalization: 1) innovation and improvement of tech. 2) liberalization of international exchanges (geopolitical). Both reduce transportation costs of international exchanges. / 2.-Technological revolution: an all-purpose revolution with large implications and market structure, unique feature: rapid and sample diffusion of its porcess. “Leapfrogging”: radical innovations can make the new companies suprass the company leader of the market. Remote worker: person that works does not go to the office to work. Usually, he/ she works from home. Distributed team: team in which the members do not share a common physical working space as they are at different places. / Internet access has increased altough there is a technological gap between developed and developing countries.// Trade openness index: the sum of imports and exports and then divide it by GDP, the index measures how open is a country to trade. Gravity model of international: predicts the bilateral trade flows between two units (countries, regions…) are based on their economic size (normally their GDP) and the distance between them. Trade between two countries is larger when countries are large and the countries are closed to each other. Border effect: refers to the asymmetries of trade patterns between regions that are not in the same country and regions that are localted in the same country. usually trade volume is smaller between regions that are not in the same country. Liberalization: process initiated after the WWII (Breton Woods agreement and Seek world peace trough wealth sharing). It is more visible in international trade and financial market, Trade liberalization: more freedom and technological advances have facilitated economic integration and a lower cost of transactions among countries. The Chinn-Ito index (KAOPEN): index that measures a countrys degree of capital account openness. It was initially introduced in Chinn and Ito. KAOPEN is based on the binary dummy variables that codify the tabulation of restrictions on cross-border financial transactions reported in the IMFs Annual Reprort on Exchange Arrangements and Exchange Restrictions (AREAER).// Three false ideas about globalization: 1) Globalization is something new, exclusive to our times 2) Globalization is irreverisble 3) Globalization is incomplete or , at least, very profound and extensive. Feldstein-Horioka paradox: it is not necessary for levels of domestic I and S to be correlated as investors would seek the best opportunity wherever it is. Domestic S and domestic I are correlated. Outsourcing: to delegate an axtivity or serivce to another company. Offshoring: a company moves parts of its company to another place. Nearshoring: offshoring to countries that are nearby. Farmshoring: moving the production to rural areas. Forward integration: vertical integraton in which companies expand their activities to control the direct distribution of their products. Backward integration: vetical integration involving the purchase or meger of suppliers in the supply chain, // Current trends in world trade: some goods and services are becoming tradable, trade patterns change because of FDI, increase in south-north trade an new global players, uncertainty about trade partnership, threat of protectionism, COVID19. // Possible types of regional agreements: Free trade agreement, Customs union, Single market.
6.-International trade
1) Mercantilism (XVI-XVIII) prevalent in Europe, tought to be the origin of capitalism, mercantilism holds that trade was good because it enabled countries to become richer by accumulating more wealth. It is best to export not to import, the government should provide the means to favour and protect national production and foster exports. 2)Adam Smith: absolute advantage theory: country that has abasolute advantage is the country that can produce more cheaply, abs advg is determined by the resources. Problem: what if a country has abs advg in everything?trade would be impossible and model would fail. 3) David Ricardo: Comparative advantage: Assumes 2x2x1 model (2 countries 2 goods 1 factor of production) factor of production (L) is not mobile. Fixed opportunity cost of goods for both countries, no transportation costs and no transaction costs, thech will determine which country has the highest labour prod. Problem: 1 factor of production per country is not realistic. 4) Heckser-Ohlin (H-O) Model: Assumes 2x2x2, 2 countries, 2 goods, 2 factors of production (K and L) whcih are not mobile and are used to produce 2 goods with constant retuns to scale, no transaction nor transportation costs.// Comparative advantage: lower opp cost, relative to other countries. Absolute advantage: lowest opportunity cost, theoretically one country can have abs advg in all the goods they produce and there is no trade. Revealed comparative advantage (RCA) index: is a measure of a countriy’s relative advg or disadvg in a specific industry as evidenced by trade flows. Economies of scale: large scale production reduces average costs, each country concentrates in producing a few goods to achieve a larger scale, which reduces production costs but not the variety of goods available because they are still available trought trade. The gravity model: F=(KxGDPixGDPj)/distance between economic capital of countries i and j. // Intra-industrial trade: where the same products are exchanged across borders. A country then acts as a producer, exporter and importer of the same goods. Intra-industrial macro effects: 1) causes a greater relationship among exports and imports 2) world trade more sensitive to econmic cycles 3) economic shokds are transmitted more quickly. // Protectionist measures (instruments of trade policy): 1) Tariffs: a specific tariff is levied as a fixed charge for each unit of imported goods an ad valorem tariff is levied as a fraction of the value of imported goods . A compound duty (tariff) is a combination of an ad valorem and a specific tariff. 2) Quotas: an import quota is a restriction on the quantity of a good that may be imported. 3) VERs: a voluntary export restraint is a limit imposed by the government of the exporting country restricting the amount of a goods that may be exported to a specific country during a certain period of time. 4) Domestic contenti requirements: regulations that require a specified fraction of a final good to be produced domestically. 5) Red tape: bureaucratic and administrative barriers. 6) Public procurement requirements: government agencies are obligated to purchase from domestic suppliers, even when they charge higher prices compared to foreign suppliers.
7.-Voting Voter turnout: % available voters who actually go and vote for the candidates proposed. Pivotal vote: you if it changes the outcome of the election. a) Party vs candidate voting (voters may prefer a certain candidate but identify themselves with another party). b) Issue voting (vote becaouse of its position on a certain issue) c) Multi-level voting: voters may have different preferences for local/national elections