Professional Documents
Culture Documents
✦Between the early 1980's and 1996 real sea freight costs fell 70%.
✦Real air freight costs have fallen 3-4% a year over a long period.
✦Real costs of international phone calls fell 4% a year in the developing
countries in the 1990's and 2% a year in the industrial countries.
350
300
250
200
150
100
50
0
1930 1940 1950 1960 1970 1980 1990
$0.30
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1930 1940 1950 1960 1970 1980 1990
04/02/08 Globalization_ Overview 15
Average Tariffs
in Industrial Countries
50
40%
40
30
20 15%
10 4.5%
0
Post. War 1960's Now
04/02/08 Globalization_ Overview 16
Average MFN Import Tariffs in
Large Developing Countries
34
24
14
✦Trade integration
✦Financial integration
✦Global production networks
percentage
55
50
45
40 Developing countries
35
30 High-income OECD
25
20
1970
04/02/08
1975 1980 1985 1990
Globalization_ Overview
1995 2000 2005
19
Trade to PPP GDP,
1986 and 1996
(percent)
70
1986 1996
60
50
40
30
20
10
0
E.Asia ECA LAC MNA
Globalization_ Overview
S.Asia SSA High income
20
04/02/08
Net Private Flows to Developing Countries, 1990-96
(in billions of US$)
US$ billions
300
250
200
150
Official flows
100
50
0
04/02/08
1990 1991 1992 1993
Globalization_ Overview
1994 1995 1996 21
Gross private capital flows
as % of PPP GDP,
1986 and 1996
25
1986 1996
20
15
10
0
04/02/08 E.Asia ECA LAC Globalization_
MNAOverview S.Asia SSA High income 22
Ratio of FDI to GDP (%) 1970-95
Developing
1.5
World
1
0.5 OECD
0
80
94
70
72
74
76
78
82
84
86
88
90
92
04/02/08 Globalization_ Overview 23
Developing Countries
and Foreign Direct Investment:
Filtering for low FDI to GDP ratios, 1990-94
45
Number of countries
FDI>1%
of
GDP
12
49 at war
28
FDI<1% 37 high
of deficits
GDP of which not or
at war inflation 5<0% growth
9
4
•Proprietary Technology
•Management Know-How •Low Labor Cost
•Global Brands
•Local Knowledge
•Global Distribution
•Scale •Domestic Distribution
•Direct Ownership
•Joint Venture
•Licensing
•Franchising
•Supplier Agreement
04/02/08 Globalization_ Overview 25
Special Characteristics of MNE
✦Many studies have shown that firms which engage in global production
enjoy unique, difficult to replicate assets--usually technology or
differentiation
✦Many studies have also shown that foreign firms usually pay higher
wages, have higher productivity, and greater export orientation--their
difficult to replicate assets enable that
✦Certain parts of the world have become magnets for GPN (global
production network) in recent years--the Mexico-US. border; Guandong,
adjoining Hong Kong; parts of Poland; parts of Malaysia; the Bombay and
Bangalore region in India--this is where growth rates are often hitting 10% a
year--and where the upgrading to higher value-added activities is occurring
most rapidly
✦Growth
✦Adjustment costs and inequality
Indonesia
Philippines
Thailand
Brazil
Better off Worse off
China
Argentina
Poland
Hungary
-20 0 20 40 60 80
04/02/08 Globalization_ Overview 30
Response to Globalization:
Policies
✦Macroeconomic stability
✦Liberalization of trade / prices / factor markets / FDI
✦Privatization
✦Orderly liberalization of capital flows
✦Better access to international markets / technology / infrastructure
✦Safety nets to ease adjustment costs