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Impact of the Globalization on a More Even Distribution of Economic Activity - Essay Example

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This essay aims to determine the influence of the globalization processes on the dispersion of production throughout the world. As it is shown in the essay, modern economic globalization occurs through trade, foreign direct investment (FDI) and international transfer of knowledge and technology…
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Impact of the Globalization on a More Even Distribution of Economic Activity
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Download file to see previous pages II. Measuring Globalisation:
It is very difficult to measure globalization basing on the movement of production factors. Dispersion of production happens in order to have more access to inputs and so also more access to the external markets. Since there are interdependencies between the factors such as direct investment flows generate exports and movement of knowledge and technology while exports can also generate technology transfers and new inflow of FDI, measuring the extent of globalization becomes a difficult task. However there are some indicators by which one can have a fair idea of extent of globalization. Some of them as cited in the OECD Handbook on Economic Globalisation Indicators are:
A. Globalisation through FDI-
1. What is the FDI position (inward and outward) as a share of GDP
2. What is the balance of inflows and outflows of direct investment for a given country
3. What is the propensity to reinvest earnings (earnings/income) from direct investment
4. What is the share of foreign-controlled affiliates in economic output.
B. Globalisation through Trade:
1. Share of total exports in GDP.
2. Average of exports in GDP.
3. Share of domestic final demand met by imports.
4. Share of GDP generated by total exports.
There are many such indicators mention of which is beyond the purview of this essay. FDI1 is a good measure to know the extent of economic activities across the globe. "To create, acquire or expand a foreign subsidiary, MNEs undertake FDI. The total direct capital owned by non-residents in a given country each year constitutes the stock of FDI" (Navaretti & Venables, 3). As stated earlier that with a propensity of access to market and also access to inputs companies goes for cross border activities or disperses their business...
This essay attempts to analyze the development of economic activities in various regions of the world under the influence of the globalization processes.
After the year 1980 the world witnessed a new movement for the global economic integration, which was rapid rapid due to technological changes in various sectors. The unprecedented technological change in the transport and communication sector making the swift movement of goods and services, human resources and information on knowledge and technology across the globe at a cheaper cost is the main factor which continues to drive the globalization process. The changing attitude of the people and more liberal government policies contributed to deepen and widen the process of the economic integration by shifting the focus of the planners from national economies to an integrated world economy.
With breaking of the trade barriers and changing of the economic policies of the nations across the world make the companies to become transnational by opening up subsidiaries to distribute the business processes throughout the world.
Though the process of economic integration occurring at a faster rate in the developed countries but the same is yet to be achieved at rapid rate in developing world. What is needed for redressing global imbalances is a responsible multilateral effort, rather than pressure on parts of the developing world. A well-coordinated international macroeconomic approach would improve the chances of the poorer countries to consolidate their gains in growth performance
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