Global123_FinalIdentifications

Global123_FinalIdentifications - Import Substitution...

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Import Substitution Industrialization Instead of trying to increase exports, focus on decreasing imports to boost domestic economy Focus on development of domestic substitutes Protective barriers against trade- High Tariffs Support infant industries by limiting foreign competition Discouragement of foreign direct investment Benefits o Increased domestic employment o Resilience in face global economic crises Problems o Inability to know what infant industry will actually succeed if protectionist policies are applied o Size of domestic market and domestic income levels to allow for local consumption: Not many are as large as success stories (Brazil and India) o Creates inefficient and less developed industry because of the lack of competition created by foreign trade Collective Good Shared by all, but owned by none Public goods no one specifically owns them
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Consumption of the good by one individual does not reduce availability of the good for consumption by others “Tragedy of the commons” – everyone wants the benefit, but one or a small group of actors typically ends up responsible for its upkeep Free Riders- most actors do no contribute, but they cannot be prevented from benefiting Negative externalities: action of producer or consumer that leads to cost to a third party o Ex.: water/ air pollution Leads to issue of collective action Economic Functions of the Environment A consumption good A supplier of resources A receptacle of wastes The Problem: not always mutually consistent, hence a collective action problem- a system governance issue Practical Dimension o Pollution, deforestation, endangered species Possible solutions – approaches to governance o Laissez Faire Market Approach o National Regulation Individual governments always have the incentive to minimize the cost of regulation Companies would take advantage of differences between regulations “race to the bottom”
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Difference between what is on the books and what is actually enforced o Formal Regimes Example: success of Montreal Protocol More equal across the board Getting agreement is not easy o Market Approaches Use market forces to encourage environmentalism Idea of proposing credits for environmentally friendly production, business etc. which can be used as capital internationally Balance of Payments An accounting of all the international monetary transactions between the residents of one nation and those of other nations in a given year. There is the “current account” and the “Capital and Financial Account” Current Account- deposits arrived from sales of goods and services, receipts of profits and interests from foreign invesetment and unilateral transfers of money (foreign aid received, private aid, and money migrant families sent home).
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This note was uploaded on 02/01/2011 for the course GLOBAL 123 taught by Professor Cohen during the Fall '10 term at UCSB.

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Global123_FinalIdentifications - Import Substitution...

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