POSC 182 Lecture 26 2010

POSC 182 Lecture 26 2010 - POSC 182: Politics and Economic...

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POSC 182: Politics and Economic Policy Unit 5: International Economic Policy Making March 8, 2010
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Globalization Globalization: The process of integrating national economies into the international economy through increased flows of trade, capital, and labor. Began to increase after the end of the Cold War and the emergence of the internet With fewer barriers (to trade, capital and labor), more goods, services, capital and labor have been able to be allocated across borders where they could get greater returns
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Comparative Advantage Comparative advantage is the ability to produce a good or provide a service at a lower opportunity cost than another person or good. Absolute advantage is the ability to produce a good or provide a service more efficiently than anyone else Theory of Comparative Advantage says that countries would be better off if everyone specialized in their own comparative advantage and then trade with other countries. Example: If Michael Jordan is a better golfer and lawn mower than me, he should focus on golfing and let me mow the lawn.
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Benefits to Trade More efficient allocation of goods/services Lower prices for consumers Higher average incomes and more employment Encourages productivity and flows of information Long-term economic growth
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Implications of Globalization International flows of capital and trade are becoming more important to countries’ economies. Moving away from import-substitution to export-led growth in many developing countries Import-substitution: producing industrial goods locally instead of importing them in order to become less dependent on international trade and to keep foreign currency Export-led growth: specializing in comparative advantages to earn more foreign currency Because capital has become more mobile, countries have become pressured to show the markets that they are good places to invest in
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This note was uploaded on 10/05/2010 for the course POSC 182 taught by Professor Schuelenberg during the Spring '08 term at UC Riverside.

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POSC 182 Lecture 26 2010 - POSC 182: Politics and Economic...

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