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Effects of globalisation, The conclusion for globalisation questions…
Effects of globalisation
g+s
-
prs
cost
strong competition from foreign producers
- competed out and forced to close down
benefits
sell more to international mkts
- increase revenue
- also allows them to expand
- reap EOS
global competition
- enourage them to innovate, and seek to be cost efficient
govt
-
disadvantages
-
-
-
increase Y inequality (because of increase dd for skilled labour)
increase cost push/dd pull inflation
- increase FDI --> increase AD
- increase px of FOP --> cost push inflation
decrease EG
- outward I could decrease dom I
- decrease dom I decrease growth of LRAS
-
capital
source country
benefits
cost advantage
- lower COP --> higher returns
achieve EG
- increase X of capital
- thus icnrease AD
- AEG occurs
cost
-
widening income disparity
- lower income workers are no longer needed for thier lower skills
host country
benefits
-
cost
- FDI wont matter if the import content is high
- investment by the developed nations are labour intensitve --> does not do much to help tehcnology
- stifle homegrown efforts
- environemental degration (esp in less developed countries)
- low safety standards and poor working condiitons
labour
host country
benefit
increase EG
- increase qty anf qly of labour
-
cost
decrease EG
- cheaper labour
- firms unlikely to use better technologies
Widening income gap
- influx of high and low skilled labour
-
source country
benefits
-
improve trade balance
- more locals going overseas to work
- consitutes net income flows
-
lower unnmt
- smaller labour force
smaller unnmt rate
cost
lower EG
brain drain
fewer residents
The conclusion for globalisation questions should always be that
- measures can be taken to reduce the negative impacts of globalisation
- if the country tries to resist globlaisation it will be detrimental to them