Globalization Patterns

1
Globalization Patterns

• Econ 303
• International Economics
• Carlos A. Benito

2
Sources of Globalizatio

• Transfers of Capital
• Labor Migration

3
Sources of Economic Globalization

• X Exports value
• Y GDP
• F Foreign Direct Investment
• I Institutional Changes such as Privatization
  Trade Liberalization Deregulation of Capital
  Markets Trade, investment, and patents
  agreements, rate of return to capital.
• Trade X/Y
• Factors affecting trade
• X/Y f(F/Y) d(X/Y)/d(F/Y) 0
• F/Y f(I)

4
How to understand an equation

• An expression such as this
• x f(y)
• is a mathematical equation which means
• x the value of x (say trade)
• f(.) depends on
• y the value of that factor (say foreign
  investment) that x depends on.
  
• The relationship between x and y may be positive
  or negative.
  
• This is additional information that is added by
  means of
  
• dx/dy how x (trade) changes, when y (foreign
  investment) changes one unit.
  
• dx/dy 0 the change is positive (or direct
  relationship)
  
• dx/dy relationship)
  
• d means change

5
Chile Sources of Globalization
Table
6
Analysis of Trade Expansion

• As the previous graphs depicts, in Chile and in
  the long run, there has been a direct
  relationship between the expansion of trade and
  foreign direct investment.
• There has been a process of globalization.
• With just this information we do not know if
  globalization is
  
• Internalization of the production process, or
• Internalization of financial sources.

7
FDI and Institutional Changes

• The expansion of FDI in Chile has been
  facilitated by the following institutional
  changes and policies
  
• Privatizations in the late 70s and early 80s.
• Liberalization of International trade in the late
  70s
  
• Liberalization of capital markets in the 1980s
• The success of the Chilean economy opportunities
  for foreign investors
  
• Modernization of agribusinesses

8
Chile Sources of Foreign Savings

• Two Sources of Foreign Savings
• F Foreign Direct Investment (mainly by
  transnational corporations)
  
• R Private Remittances (mainly from emigrant
  workers)
  
• W wage rate
• C Costs (transportation, information, restricted
  legal conditions)
  
• O Other non-economic factors
• R/(FR) f (M t-v)
• M t-n f(Wt-vn - Wt-vs ), C, O
• M international emigration

9
Sources of Foreign Savings
Tables
10
Analysis of Foreign Savings in Chile

• Workers remittances, in the long run, have been
  declining significantly in relationship to
  foreign direct investments.
  
• With just this information we dont know if
  workers remittances are used for household
  consumption or business investments within Chile.

11
Chile Factors affecting Out migrations

• Differences in wage rates have been a minor
  factor
  
• Mainly between Chile and Argentina before the
  1970s.
  
• Political factors motivated the out-migration of
  professionals
  
• During 1970s (leftist government)
• During 1980s (dictatorship)

12
Chile Factors affecting Out migrations

• With the success of Chiles economy no longer
  out-migrations are important
  
• The reduction of the ration R/(FR) is mainly due
  to an increase in F (federal direct investments)