Applied Economic Analysis

Applied Economic Analysis

1. Wealth and poverty

2. Globalisation

   • Definitions?
     • "where geographical distance becomes a dimising factor of importance in cross boarder economic, political and social-cultural activities"
     • "The spread of ideas and knowledge"
     • "increasing integration on a world wide scale of national economies - in terms of trade, markets, financial flows, ideas, information and technology"
   • Origins?
     • Most people assume that globalisation was initiative during the industrial revolution in the 1960's
     • take off of the internet, improvements in transport, influences of satellite and toruism
     • Roman empire - using common lanuage, currency and citizenship
       • Acquisition of raw materials, food, energy, labour and skills - Spread of compatible socio-economic system
   • Impacts
     • Positive
       • creates fairer opportunities
         • Lifting people out of poverty
       • For the UK: high levels of FDI, the uk was favoured for overseas direct investment due to improvements in the supply side performance of the economy, favourable tax system
         • Growth of multinationals and movements of capital and labour
         • greater integration of economic business cycle, greater economies of scale
         • Geater competition (arguabley?)
     • Negative
       • Environmental costs due to increased transportation
       • unbalanced division of labour
         • Tax avoidance and unclear legality
       • free trade can harm developing countries, core exploites the core

3. Multinationals

   • Globalisation facilitates multinationals
   • Advantages
     • Economies of scale, reduced risk of operating in different countries with different business cycles, tax advantages
     • transfer of skills and knowledge, injections of capital physical and financial, improvements in infrastructure by FDI which may could not have been made by the local government
   • Disadvantages
     • low paid/low skilled work, poor conditions, child labour, prevents domestic growth, becomes dependant on FDI for employment and income, environmental costs of transporting and mass production, those in employment may not benefit from increased wealth or living conditions
   • Difficulties
     • local resources of labour and skill set are different, language barrier. differences in communications and infrastructure
       • more markets to keep up with - economically different, currency, business cycle, taste, volatile exchange rates, high or unstable inflation & more influences - political/cultural/social

4. Emerging markets

   • an emerging market is one which is economically improving, typically with high GDP % growth, high inflation, increasing employment and a larger secondary industry
   • BRICs Vs MINTS
   • CHINA
     • ECONOMICALLY - GDP growth % is high although its reccently slowing, wage inflation is an issue causing world commodity prices to rise however productivity is increasing. Inflation is fairly low and stable - preferable economic conditions
     • DEMOGRAPHICALLY - one child policy slowed growth rate, china is still the largest pool of labour in the world. there is also a gender indifference
     • EXCHANGE RATE - possibily kept artificially low in order to make exports US imports still cheap despite the apreication of the YUAN/RENIMBI. Chinese government does this by being one of the main buyers of us government bonds and re-circling the dollars
   • INDIA
     • SOCIALLY - issues with discrimination (cast system) however demographically these people have a greater entrepreneurship than those in China meaning they may do better in a free market economy and world trading environment
     • ECONOMICALLY -