Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

Globalisation Transationals and Economic Policy - Essay Example

Comments (0) Cite this document
Aircraft manufacture is one industry that lends economy of scale and for which there is a great tendency for one dominant firm to take advantage of increasingly higher returns should it be the sole competitor in that industry. A country could raise more income if it favors a domestic aircraft manufacturer over a foreign firm…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94% of users find it useful
Globalisation Transationals and Economic Policy
Read Text Preview

Extract of sample "Globalisation Transationals and Economic Policy"

Download file to see previous pages 136-137). Assuming that Boeing has a headstart, the likely outcome is that of Airbus deciding not to produce the aircraft, in favor of 0 loss, rather than to enter the market against Boeing, in which both firms would each incur losses amounting to -5. However, once Europe decides to subsidize Airbus, the outcome of the game shifts in favor of Airbus, and it can decide to go head-on with Boeing in the market, earning profits while Boeing incurs losses. Moreover, should Boeing decide to not produce as it would be incurring 0 loss in this, Airbus by producing the aircraft would allow it to raise its profits from 0 loss in the previous scenario with no subsidy to 110 profits post-subsidy by Europe. Krugman further notes that out of this, 100 represents a gain of national income for Europe, and conversely, a loss of the same amount for America. This shows that under some circumstances, a country can lift its welfare by supporting its own firms against foreign competitors. At the same time, a domestic firm can lower the profits of other firms which wish to enter the domestic market.
Another reason for strategic trade policy as the case above is when viewed from the possibility of existence of external economies - one in which it has been observed that innovative firms, with huge investments in R&D fail to "appropriate fully the knowledge they create". This case is not evident in "perfectly competitive models" as when increasing returns is tied with economies of scale in markets with imperfect competition. The argument for strategic trade policy based on externalities however need not affect other countries' welfare negatively - as when governments choose particular industries or firms to support. However, this is not the case when externalities are at the national level, in which clearly free trade is at the mercy of a government's protectionist policies.
Pursuing a strategic trade policy is limited by at least three factors that make it a less desirable option. First, external economies are difficult to measure, measurement of which is needed to formulate interventionist policies (i.e. difficult to measure the exact external benefit of say, a $10 investment in R&D). Second, rent-seeking firms could water down the gains from interventionist policies. Third, a country's considerations for its economy overall adds greatly to the empirical difficulty of formulating strategic trade policies (that is, "a country cannot protect everything and subsidize everything").
The above considerations however, according to Krugman do not render the pursuit of strategic trade policy undesirable. In most cases, they point to caution as to the difficulties are due to empirical considerations - and yet, governments are not altogether, lacking in information.
In what sense, of any, is it appropriate to consider that international trade in today's world is free
International trade in today's world can be considered free to a certain extent by measuring the progress done compared to the past. For example one indicator suggests that the pace of international tra ...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
(“Globalisation Transationals and Economic Policy Essay”, n.d.)
Retrieved from
(Globalisation Transationals and Economic Policy Essay)
“Globalisation Transationals and Economic Policy Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Globalisation Transationals and Economic Policy

Expansionary Economic Policy

... Expansionary economic policy America used to embrace the philosophy of Laissez Faire in the past and this made the United States government to perform minimal roles in monitoring and controlling the economy. However, as time went by, the philosophy underwent a radical change and took a new course that was different from the parent one. The radical change has brought the understanding of the most important roles that are to be played by the federal government, which includes the role of regulating and stabilizing the economy of the country. The terms monetary and fiscal policy have almost a similar meaning but with only a slight difference. Fiscal policy stands for the power possessed by the federal government to tax as well as spend...
9 Pages (2250 words) Essay

Economic Policy Recommendarion

...? Running head: economic policy recommendation 28th November Introduction One of the notable social issues that are affecting the economic development of any country is poverty. In their efforts to mitigate the economic obstacles such as unemployment and low demand of products and poor quality of education, developing countries are faced with high level of poverty. Poverty, a state that is defined as lack of certain amount of vital materials or money, is categorized into absolute and relative poverty. Absolute poverty entails the lack of basic human needs that includes clothing, health care, shelter, sanitation, food and education. Relative poverty on the other hand, refers to the economic inequality that is experienced in a particular...
7 Pages (1750 words) Research Paper

Government Economic Policy

...Objectives of Government Economic Policy and the Instruments It Uses To Carry Them Out: Introduction: Economic policies are measures taken by the government to influence the behaviour of an economy, there exist two types of policies that government use to influence the economy and they include the fiscal policy and the monetary policies. Fiscal policies include taxation and government spending; the monetary policy will include money supply and other measures that influence the amount of money circulating in an economy. These two policies may sometimes prove to be harmful to an economy in that many scholars argue that an economy should be left at a state of laissez faire. This is to say that a government should not interfere...
12 Pages (3000 words) Essay

Globalisation, Transnationals and Economic Policy

...Globalisation, Transnationals and Economic Policy INTRODUCTION: Foreign direct investment (FDI) is described the long-term investment by a foreign based direct investor in a business organization or enterprise residing in an economy that is not where the economy of the the foreign direct investor is located. Basically, the relationship in a foreign direct investment supply scheme, consists of a investing parent enterprise and the foreign affiliate where money is invested in. This business relationship is described as a transnational corporation.. To qualify as Foreign direct investment company, the acquisition agreement must afford the parent enterprise control over its acquired foreign affiliate. The United Nations explains...
6 Pages (1500 words) Essay

Globalisation and Economic Sociology

...GLOBAL MARKETING Economic globalisation is showing high-end results, impact on the part of economical evolutions on nations mainly on cities and individual person's life standard. Because of the globalisation the technologies as exchanged. Globalisation and economic sociology is having tremendous impact on cities. Cities are transforming into great industrial belts. As the industries grow there will be visible impact on the economy. Job opportunities grow and innumerable colonies are developed. The growth is multi-fold and the technology exchange migration takes place. People of different nations migrate to cities. Different nations of people live in one city, like Lenovo representing unity in diversity with so many cultures...
6 Pages (1500 words) Term Paper

The Current Economic Policy

However in Gaza, due to political problems, 95% of the factories in Gaza had closed down leading to 32000 job losses. Many of these factories were approaching a point of ‘no return’ where owners were likely to sell their assets and shut down completely. (The Portland trust, Nov 2007)

In the previous years, between 2005 and 2006, the GDP in Palestine fell by 8.8%. In the first quarter of 2007, the GDP fell by 4.2%. This was 13.2% lower than the GDP for the first quarter of 2006. (The Portland Trust, July 2007)

Besides the negative growth of the economy, it is the composition of the GDP that remains a cause for concern. The GDP is driven by Government and private consumption from aid rather than invest...

7 Pages (1750 words) Term Paper

Economic Globalisation and Developing Nations

...Discussion on Economic Globalisation and Its Impact Upon Developing Nations Biologists incorporate a very neutral attitude towards their . Life forms are neither good nor bad; they simply have effects upon other life forms, all in the name of survival and evolution. Surprisingly, this same idea can be carried over into the area of economics. The management of assets and the buying and selling of goods can take various forms within different societies. The rules and methods ruling these transactions have evolved over time. Similar to the rules of survival for the animal kingdom, the methods for financial survival are not "good" or "bad" per se. Arguably, differing methods for pursuing the accumulation of material goods differ...
7 Pages (1750 words) Essay

Chapter 9 Economic policy

... Economic policy This chapter offers an in-depth analysis of American political system including political policies, institutions, and resources. It reveals how America’s democracy is ineffective since it has been unable to handle inequalities in economic and political resources. Further, it shows the connections between social issues such as health care, education, and American politics. The book shades light on the ongoing debate between democracy and capitalism (Katznelson, Kesselman, and Draper 2010). The main theme in the chapter includes Health care issues America’s globalized future Education The issue of access to health care in American society is connected with the politics of power. For instance, social and economic sectors...
2 Pages (500 words) Book Report/Review

Economic migration and globalisation

...Economic migration and globalisation Introduction This paper analyses the issue of economic migration in the world today. The terms globalisation and economic migration are defined and different types of economic migration are described. The theoretical perspective known as positive globalist approach is explained and then its links with the topic of economic migration are explored. The strengths and weaknesses of the positive globalist approach are then evaluated. Definition of Key Terms Globalisation can be defined as “the intensification of worldwide social relations and interactions such that distant events acquire very localized impacts and vice versa” (Held and McGrew, 2007, p. 2). In the present study the economic interactions...
6 Pages (1500 words) Essay

Expansionary Economic Policy

...EXPANSIONARY ECONOMIC POLICY TO MOVE THE ECONOMY OUT OF RECESSION In order to take the economy out of a depression, the federal government would connect in expansionary economic strategies. The government would undertake expansionary fiscal and monetary policies as stabilisation policies of the government. The expansionary fiscal policy is brought about by the changes in government expenditure and taxes. These changes would affect the aggregate demand , gross domestic product and employment. In expansionary monetary policy, the Federal Reserve Bank (The Fed) changes the required reserve ratio, the discount rate or carries out open market operations. These tools moves the economy out...
8 Pages (2000 words) Research Paper

United States Foreign Policy from 1945-1991

American Presidents presiding over some key events in history, such as the Cuban Missile Crisis, The Cold War, The Vietnam War, etc., were hindered from acting as public representatives due to pressure from the military-industrial complex. John Kennedy, Lyndon Johnson, Ronald Reagan, George Herbert Walker Bush, and George W. Bush – all of them were subject to these opposing interests. But eventually, the corporate-government nexus proved too powerful; and in this sense, American Presidents after the Second World War were largely restricted and powerless to uphold their higher personal values. Most of the strategic moves on part of the United States after the end of the Great War were directly in response to an anticipated th...
11 Pages (2750 words) Essay

The Economic Impact of the Emergence of China and India

The main macroeconomic variable that toys in the global economy’s shift are the emergence of India and China as new superpowers. This emergence certainly has a number of implications, but among the most relevant are: disruption of the equilibrium of the global economy which results in rising demand of goods, giving way to worldwide inflation; the attractiveness of outsourcing to these countries due to low cost but high talent workforce of these countries for cheaper operations.
The growing middle class of China and India results in booming demand for the automobile industry. This increase in demand, with the increasing purchasing power of these countries’ people, is not limited to automobiles but more apparent in...
10 Pages (2500 words) Assignment

Gross Domestic Product and the Nations Competency in Terms of Economic Welfare

It is often used to compare the economic performance to aid as a prediction tool and to analyze the business cycles and the recessive and expansive economic performances within them. This further aid economic and fiscal policy formulation of the government and is also used to analyze the consumer behavior and the economic phenomena involved. (Heakal, R. 2008).These figures can be a benchmark to compare economies of different nations and the economic prediction process is also made possible.

A usual pattern of assessing the Gross Domestic Product is to have an initial GDP report on every quarter which is an advance report. Two corrective reports follow this before the final figures on GDP are arrived at. It usually takes...
7 Pages (1750 words) Report

Emergency Economic Stabilization Act of 2008 and How It Has Impacted the Financial Markets

Though there were objections from various quarters about the huge amounts of tax payer’s money being used in the bailout of huge corporates, the Act has been successful in moving the downturn towards a flat point and now has started slowly moving towards a recovery stage. The various programs under the EESA 2008 have played a significant role in the financial sector, housing mortgage, and banking institutions to save the institutions from complete disaster.

The Emergency Economic Stabilization Act is a huge taxpayer bailout designed to rescue the financial sector. The amount of money to be used is around $700 billion or $2000 per American citizen (Public mark up). Emergency Economic Stabilization Act of 2008 is al...
10 Pages (2500 words) Research Paper

Information Security Policy of Organization

In the modern age of information technology, there are many threats created for organizational information. Organizations need a security model that has the capability to handle and secure our information reserves. Technical administrative safety /security measures like security plans, actions and procedures are the general practices for the organizational information security procedures. The attentiveness of producing actions is concerned by the organizations to an appreciably smaller level, on the other hand at the same time these are weighed up as being further efficient organizational actions than technical administrative ones. Information security encompasses organizational features, officially authorized aspects, institution...
6 Pages (1500 words) Research Paper

Economic Analysis of India

The country’s economy is fast growing with a stable political system that encourages foreign investment although with certain restrictions. The country generally has good energy, transport and communication systems which make the cost of doing business affordably.

The Republic of India found South of Asia is by far the world’s most populous democracy and ranks seventh largest in terms of geographical area (Brown, 1994). India is also the second most highly populated country in the world. The country has a rich culture with four major religions having originally emerged from it; Sikhism, Buddhism, Hinduism, and Jainism. The Indian Republic consists of seven union territories and 28 states and ranks twelfth la...
8 Pages (2000 words) Case Study

Bernard Madoff : A Scapegoat of the Economic Crisis

Darwin was condemned and treated with contempt by the Church for proposing the theory of evolution that linked all living matter in the earth, including humans. In the case of Bertrand Russell, he was imprisoned as a conscientious objector, for expressing his opposition to British participation in the First World War. These are typical examples of people being wrongfully punished when they were guilty of no crime or fraud or misdoing. It would be highly improper to associate Bernard Madoff with the aforementioned luminaries, for he was truly guilty of carrying out the biggest financial fraud in modern history. At the same time, it would be simplistic to classify him as a victim of the contemporary judicial system. The truth, in fa...
6 Pages (1500 words) Assignment

European Union Policy: Turkey

... has been functioning for the last 5 years with challenging major problems. The relocation of jobs for new member states came to the surface, but these are mainly economic difficulties. These problems can be traced to the impact of internet revolution, the changing pattern of foreign competition due to globalisation. From the political angle, the problems of EU as for expansion of membership seem to be prudent. The ratification of the Constitutional Treaty and the Lisbon Treaty did tender some difficulties. The present global situation and macroeconomic position does not provide a positive climate for enlargement. The time of economic growth is favorable for the admittance for the new members. Between 1995-2007 the EU more than doubled...
9 Pages (2250 words) Case Study

International Business: World Economic Forum and Davos 2010

...Introduction Globalization, one of the most hotly debated issues means global capitalism to some while others consider it to be the continuation of modernism with the forces of wealth, progress, democracy and happiness at play (Kellner, 2002). Globalization is considered to be beneficial which promotes economic prosperity, cultural diversity and technological advancement. According to the critical social theory, technology and capital work together to create a new globalized and interconnected world. While each force of globalization is important, technological revolution has impacted the business models, value creation and differentiation (Spelman, 2010). The cloud computing technologies that have made the popular social networking...
7 Pages (1750 words) Coursework

Globalization and World Economic Forum at Davos 2010

...Globalization and World Economic Forum at Davos Forces Driving Globalization Globalization has resulted in enhanced interdependencies among thenations of unprecedented scale. This augmented interdependence has caused the dismantling of trade barriers and liberalization of markets. The forces of globalization have impacted the nations, the firms and the individuals alike with the prerequisite of liberalization of trade (Awuah, 2009). The seven forces of globalization are; Markets, Production, Culture, Labor, Technology, Environment and Liberalization. Of these factors, the globalization of markets has engaged substantial attention of the firms and the academia. Some markets are highly globalized, while some are not. The scale of market...
7 Pages (1750 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Globalisation Transationals and Economic Policy for FREE!

Contact Us