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Globalisation and its effects - Coggle Diagram
Globalisation and its effects
impact on 4 macroecon goals
Sustained economic growth
Higher economic growth
Among both developed and developing countries
Increased access to foreign markets --> enabled a country to increase its exports
increased international capital mobility --> inflow of FDI increases
excessive inflow of foreign capital --> deplete country's natural resources, economic growth may not be sustained
Brain drain
Loss of academic and technological labour force --> reduction in productive capacity
Healthy BOT
increased volume of international transactions between businesses and freer flow of information globally
Depends on whether country import or export more
Developing countries tend to face current account deficit
Export cheap agricultural goods
Import expensive manufactured goods
Low inflation
Domestic prices and affected by imported inflation rates
Excessive inflow of foreign capital lead to inflationary pressures
low unemployment
Jobs lost when firms switch their production to countries with lower unit labour costs
Increase in structural unemployment as low-skilled workers are displaced
Developed countries lose comparative advantage in low-skilled labour industries
Impact on SOL
New tradable products --> increase material SOL
Higher consumer welfare
Wider choice and lower prices
greater variety of products
Increased competition between countries --> drives prices down
Non-material SOL
Possible decrease as workers are overworked
Pollution and exhaustion of natural resources
possible overcrowding and social problems
Impact on equity
increase workers' earning power
Increase inequality
developed countries benefitted more than developing countries
level of poverty has increased in some developing industries
Unfair trade practices
Rich countries enjoy higher income growth
Within countries (developing)
low-skilled workers exploited by MNCs
abundance of low-skilled labour cause wages to be depressed as MNCs are profit motivated
Within countries (developed)
foreign workers push down wages of low-skilled workers, widening income disparity
Impact on efficiency
ICT
increased efficiency and reduced the cost of transmitting and communicating information
overseas sale has become essential for increased production to achieve MES
Inflow of workers, both low-wage and foreign talent --> higher levels of efficiency and output
Expansion of markets --> increase competition and economies of scale help to increase productive efficiency
More investment in R&D --> increase dynamic efficiency
Brain drain
Country loses academic and technological labour force through migration --> reduce productive capacity
specialisation according to comparative advantage increases efficiency