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Globalisation, Costs and Benefits, cause, Characteristics, Impact on…
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Costs and Benefits
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- increased economics of scale
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- free trade can harm developing economies
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cause
Trade in goods
For, rich developed countries, goods are increasingly being manufactured abroad.
This trade is occurring because developing countries are acquiring the capital equipment and the know how to produce manufactured goods.
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Multinational companies
Multinational companies are growing because only large multinational companies have the economies of scale and technological knowledge to make products that are both cheap and technological advanced
Communications and IT
Developments in communications and information technologies have shrunk the time needed for economic agents to communicate with each other.
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Impact on workers
Migration
Increased migration is a characteristic of globalisation. Many migrants are forced to move from their homes because of war and persecution.
However, many are economic migrants, moving because they think they can enjoy a better standard of living for themselves and their families in a new country.
First generation immigrants tend to be successful in getting jobs and increasing their income. so they can fill skill gaps in the economy
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Wages
In a perfect labour market where all workers are homogeneous, alll workers will earn the same wage rate. Globalisation is shifting workers to different locations round the world. it is also shifting places of work from one country to another.
International competition has tended to depress the wages of unskilled and low skilled workers in developed countries as a result
Multinationals
Multinationals create jobs wherever they set operations. They are sometimes criticised for only creating low level jobs for local employees whilst importing more highly skilled labour from abroad.
Training local workers to take high level jobs within the company is an investment which strengthens the company. Training given to employees also spills over into the local economy. It raises the level of human capital.
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Impact on producres
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Tax avoidance.
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Transfer pricing A firm produces good X in country A and then transports to country B to make into good Y which it then sells.
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costs and markets
Globalisation allows firms to source products from wider variety of countries and firms. The wider the supplier network, the lower is likely to be the price at which a firm can buy.
Firms in the UK can sell to countries which previously were closed to trade or had insufficient incomes to their goods.
Footloose capitalism
Firms which operate in several countries have the power to move production from country to country, creating and destroying jobs and prosperity in their wake. They do this to maximise their profits.
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Impact on consumers
Incomes
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Globalisation has raised incomes round the world. Consumers are therefore able to buy more goods. However, not every consumer has gained
Consumer choice
The availability of goods and services has considerably increased with globalisation leading to greater consumer choice.
Prices
Globalisation is leading to a fall in the price of some goods and services because production is being switched from high cost locations to low cost locations.
Impacts on governments
Governments have to adopt policies which will capture as large a share as possible of the benefits of globalisation and minimise the losses.
Governments have become increasingly aware of the ability of multinationals to avoid paying taxes on their activities in a country.
Multinational companies have a long history of gaining contracts or control of resources through bribing government officials
The process of increased integration and co-operation of different national economies. It involves national economies becoming increasingly inter-related and integrated.