Abstract
This chapter is devoted to developing elements of an economic theory of globalization. At the beginning different aspects of the globalization of markets and production are considered and the main causes of the globalization process since the early 1970s are enumerated. To entangle the economic consequences of two of these main causes a comparative static analysis is used first. Since the integration of populous developing countries into the world market economy changes their factor-proportions, the simultaneous dynamics of region-specific factor proportions and terms of trade are analyzed in an intertemporal equilibrium of the Heckscher-Ohlin two-country model. In view of rather high savings rates of Asian economies a terms-of-trade improvement for these emerging economies can be foreseen. To check this rather optimistic long-run result Krugman and Venables’ (Quartely Journal of Economics, 110, 857–880, 1995) medium-run core-periphery globalization model is finally analyzed.
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Notes
- 1.
Siebert (2009, 21) points out that for some countries the share of service trade in total exports is admittedly higher like e.g. 29% for the USA or 39% for the UK in 2004.
- 2.
The relatively high savings rates of Asian countries corroborate this assumption.
- 3.
To simplify the exposition we present in the following only the Northern equilibrium conditions. Analogous conditions hold for South.
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Farmer, K., Schelnast, M. (2013). Globalization, Capital Accumulation, and Terms of Trade. In: Growth and International Trade. Springer Texts in Business and Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33669-0_12
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DOI: https://doi.org/10.1007/978-3-642-33669-0_12
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