research questions on economic globalization

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Research Article

Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities

* E-mail: [email protected]

Affiliations Faculty of Management, Universiti Teknologi Malaysia (UTM), Johor, Malaysia, Department of Management, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran

Affiliation Applied Statistics Department, Economics and Administration Faculty, University of Malaya, Kuala Lumpur, Malaysia

• Parisa Samimi, 
• Hashem Salarzadeh Jenatabadi

• Published: April 10, 2014
• https://doi.org/10.1371/journal.pone.0087824
• Reader Comments

This study was carried out to investigate the effect of economic globalization on economic growth in OIC countries. Furthermore, the study examined the effect of complementary policies on the growth effect of globalization. It also investigated whether the growth effect of globalization depends on the income level of countries. Utilizing the generalized method of moments (GMM) estimator within the framework of a dynamic panel data approach, we provide evidence which suggests that economic globalization has statistically significant impact on economic growth in OIC countries. The results indicate that this positive effect is increased in the countries with better-educated workers and well-developed financial systems. Our finding shows that the effect of economic globalization also depends on the country’s level of income. High and middle-income countries benefit from globalization whereas low-income countries do not gain from it. In fact, the countries should receive the appropriate income level to be benefited from globalization. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

Citation: Samimi P, Jenatabadi HS (2014) Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities. PLoS ONE 9(4): e87824. https://doi.org/10.1371/journal.pone.0087824

Editor: Rodrigo Huerta-Quintanilla, Cinvestav-Merida, Mexico

Received: November 5, 2013; Accepted: January 2, 2014; Published: April 10, 2014

Copyright: © 2014 Samimi, Jenatabadi. This is an open-access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Funding: The study is supported by the Ministry of Higher Education of Malaysia, Malaysian International Scholarship (MIS). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Competing interests: The authors have declared that no competing interests exist.

Introduction

Globalization, as a complicated process, is not a new phenomenon and our world has experienced its effects on different aspects of lives such as economical, social, environmental and political from many years ago [1] – [4] . Economic globalization includes flows of goods and services across borders, international capital flows, reduction in tariffs and trade barriers, immigration, and the spread of technology, and knowledge beyond borders. It is source of much debate and conflict like any source of great power.

The broad effects of globalization on different aspects of life grab a great deal of attention over the past three decades. As countries, especially developing countries are speeding up their openness in recent years the concern about globalization and its different effects on economic growth, poverty, inequality, environment and cultural dominance are increased. As a significant subset of the developing world, Organization of Islamic Cooperation (OIC) countries are also faced by opportunities and costs of globalization. Figure 1 shows the upward trend of economic globalization among different income group of OIC countries.

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https://doi.org/10.1371/journal.pone.0087824.g001

Although OICs are rich in natural resources, these resources were not being used efficiently. It seems that finding new ways to use the OICs economic capacity more efficiently are important and necessary for them to improve their economic situation in the world. Among the areas where globalization is thought, the link between economic growth and globalization has been become focus of attention by many researchers. Improving economic growth is the aim of policy makers as it shows the success of nations. Due to the increasing trend of globalization, finding the effect of globalization on economic growth is prominent.

The net effect of globalization on economic growth remains puzzling since previous empirical analysis did not support the existent of a systematic positive or negative impact of globalization on growth. Most of these studies suffer from econometrics shortcoming, narrow definition of globalization and small number of countries. The effect of economic globalization on the economic growth in OICs is also ambiguous. Existing empirical studies have not indicated the positive or negative impact of globalization in OICs. The relationship between economic globalization and economic growth is important especially for economic policies.

Recently, researchers have claimed that the growth effects of globalization depend on the economic structure of the countries during the process of globalization. The impact of globalization on economic growth of countries also could be changed by the set of complementary policies such as improvement in human capital and financial system. In fact, globalization by itself does not increase or decrease economic growth. The effect of complementary policies is very important as it helps countries to be successful in globalization process.

In this paper, we examine the relationship between economic globalization and growth in panel of selected OIC countries over the period 1980–2008. Furthermore, we would explore whether the growth effects of economic globalization depend on the set of complementary policies and income level of OIC countries.

The paper is organized as follows. The next section consists of a review of relevant studies on the impact of globalization on growth. Afterward the model specification is described. It is followed by the methodology of this study as well as the data sets that are utilized in the estimation of the model and the empirical strategy. Then, the econometric results are reported and discussed. The last section summarizes and concludes the paper with important issues on policy implications.

Literature Review

The relationship between globalization and growth is a heated and highly debated topic on the growth and development literature. Yet, this issue is far from being resolved. Theoretical growth studies report at best a contradictory and inconclusive discussion on the relationship between globalization and growth. Some of the studies found positive the effect of globalization on growth through effective allocation of domestic resources, diffusion of technology, improvement in factor productivity and augmentation of capital [5] , [6] . In contrast, others argued that globalization has harmful effect on growth in countries with weak institutions and political instability and in countries, which specialized in ineffective activities in the process of globalization [5] , [7] , [8] .

Given the conflicting theoretical views, many studies have been empirically examined the impact of the globalization on economic growth in developed and developing countries. Generally, the literature on the globalization-economic growth nexus provides at least three schools of thought. First, many studies support the idea that globalization accentuates economic growth [9] – [19] . Pioneering early studies include Dollar [9] , Sachs et al. [15] and Edwards [11] , who examined the impact of trade openness by using different index on economic growth. The findings of these studies implied that openness is associated with more rapid growth.

In 2006, Dreher introduced a new comprehensive index of globalization, KOF, to examine the impact of globalization on growth in an unbalanced dynamic panel of 123 countries between 1970 and 2000. The overall result showed that globalization promotes economic growth. The economic and social dimensions have positive impact on growth whereas political dimension has no effect on growth. The robustness of the results of Dreher [19] is approved by Rao and Vadlamannati [20] which use KOF and examine its impact on growth rate of 21 African countries during 1970–2005. The positive effect of globalization on economic growth is also confirmed by the extreme bounds analysis. The result indicated that the positive effect of globalization on growth is larger than the effect of investment on growth.

The second school of thought, which supported by some scholars such as Alesina et al. [21] , Rodrik [22] and Rodriguez and Rodrik [23] , has been more reserve in supporting the globalization-led growth nexus. Rodriguez and Rodrik [23] challenged the robustness of Dollar (1992), Sachs, Warner et al. (1995) and Edwards [11] studies. They believed that weak evidence support the idea of positive relationship between openness and growth. They mentioned the lack of control for some prominent growth indicators as well as using incomprehensive trade openness index as shortcomings of these works. Warner [24] refuted the results of Rodriguez and Rodrik (2000). He mentioned that Rodriguez and Rodrik (2000) used an uncommon index to measure trade restriction (tariffs revenues divided by imports). Warner (2003) explained that they ignored all other barriers on trade and suggested using only the tariffs and quotas of textbook trade policy to measure trade restriction in countries.

Krugman [25] strongly disagreed with the argument that international financial integration is a major engine of economic development. This is because capital is not an important factor to increase economic development and the large flows of capital from rich to poor countries have never occurred. Therefore, developing countries are unlikely to increase economic growth through financial openness. Levine [26] was more optimistic about the impact of financial liberalization than Krugman. He concluded, based on theory and empirical evidences, that the domestic financial system has a prominent effect on economic growth through boosting total factor productivity. The factors that improve the functioning of domestic financial markets and banks like financial integration can stimulate improvements in resource allocation and boost economic growth.

The third school of thoughts covers the studies that found nonlinear relationship between globalization and growth with emphasis on the effect of complementary policies. Borensztein, De Gregorio et al. (1998) investigated the impact of FDI on economic growth in a cross-country framework by developing a model of endogenous growth to examine the role of FDI in the economic growth in developing countries. They found that FDI, which is measured by the fraction of products produced by foreign firms in the total number of products, reduces the costs of introducing new varieties of capital goods, thus increasing the rate at which new capital goods are introduced. The results showed a strong complementary effect between stock of human capital and FDI to enhance economic growth. They interpreted this finding with the observation that the advanced technology, brought by FDI, increases the growth rate of host economy when the country has sufficient level of human capital. In this situation, the FDI is more productive than domestic investment.

Calderón and Poggio [27] examined the structural factors that may have impact on growth effect of trade openness. The growth benefits of rising trade openness are conditional on the level of progress in structural areas including education, innovation, infrastructure, institutions, the regulatory framework, and financial development. Indeed, they found that the lack of progress in these areas could restrict the potential benefits of trade openness. Chang et al. [28] found that the growth effects of openness may be significantly improved when the investment in human capital is stronger, financial markets are deeper, price inflation is lower, and public infrastructure is more readily available. Gu and Dong [29] emphasized that the harmful or useful growth effect of financial globalization heavily depends on the level of financial development of economies. In fact, if financial openness happens without any improvement in the financial system of countries, growth will replace by volatility.

However, the review of the empirical literature indicates that the impact of the economic globalization on economic growth is influenced by sample, econometric techniques, period specifications, observed and unobserved country-specific effects. Most of the literature in the field of globalization, concentrates on the effect of trade or foreign capital volume (de facto indices) on economic growth. The problem is that de facto indices do not proportionally capture trade and financial globalization policies. The rate of protections and tariff need to be accounted since they are policy based variables, capturing the severity of trade restrictions in a country. Therefore, globalization index should contain trade and capital restrictions as well as trade and capital volume. Thus, this paper avoids this problem by using a comprehensive index which called KOF [30] . The economic dimension of this index captures the volume and restriction of trade and capital flow of countries.

Despite the numerous studies, the effect of economic globalization on economic growth in OIC is still scarce. The results of recent studies on the effect of globalization in OICs are not significant, as they have not examined the impact of globalization by empirical model such as Zeinelabdin [31] and Dabour [32] . Those that used empirical model, investigated the effect of globalization for one country such as Ates [33] and Oyvat [34] , or did it for some OIC members in different groups such as East Asia by Guillaumin [35] or as group of developing countries by Haddad et al. [36] and Warner [24] . Therefore, the aim of this study is filling the gap in research devoted solely to investigate the effects of economic globalization on growth in selected OICs. In addition, the study will consider the impact of complimentary polices on the growth effects of globalization in selected OIC countries.

Model Specification

Methodology and Data

This paper applies the generalized method of moments (GMM) panel estimator first suggested by Anderson and Hsiao [38] and later developed further by Arellano and Bond [39] . This flexible method requires only weak assumption that makes it one of the most widely used econometric techniques especially in growth studies. The dynamic GMM procedure is as follow: first, to eliminate the individual effect form dynamic growth model, the method takes differences. Then, it instruments the right hand side variables by using their lagged values. The last step is to eliminate the inconsistency arising from the endogeneity of the explanatory variables.

The consistency of the GMM estimator depends on two specification tests. The first is a Sargan test of over-identifying restrictions, which tests the overall validity of the instruments. Failure to reject the null hypothesis gives support to the model. The second test examines the null hypothesis that the error term is not serially correlated.

The GMM can be applied in one- or two-step variants. The one-step estimators use weighting matrices that are independent of estimated parameters, whereas the two-step GMM estimator uses the so-called optimal weighting matrices in which the moment conditions are weighted by a consistent estimate of their covariance matrix. However, the use of the two-step estimator in small samples, as in our study, has problem derived from proliferation of instruments. Furthermore, the estimated standard errors of the two-step GMM estimator tend to be small. Consequently, this paper employs the one-step GMM estimator.

In the specification, year dummies are used as instrument variable because other regressors are not strictly exogenous. The maximum lags length of independent variable which used as instrument is 2 to select the optimal lag, the AR(1) and AR(2) statistics are employed. There is convincing evidence that too many moment conditions introduce bias while increasing efficiency. It is, therefore, suggested that a subset of these moment conditions can be used to take advantage of the trade-off between the reduction in bias and the loss in efficiency. We restrict the moment conditions to a maximum of two lags on the dependent variable.

Data and Empirical Strategy

We estimated Eq. (1) using the GMM estimator based on a panel of 33 OIC countries. Table S1 in File S1 lists the countries and their income groups in the sample. The choice of countries selected for this study is primarily dictated by availability of reliable data over the sample period among all OIC countries. The panel covers the period 1980–2008 and is unbalanced. Following [40] , we use annual data in order to maximize sample size and to identify the parameters of interest more precisely. In fact, averaging out data removes useful variation from the data, which could help to identify the parameters of interest with more precision.

The dependent variable in our sample is logged per capita real GDP, using the purchasing power parity (PPP) exchange rates and is obtained from the Penn World Table (PWT 7.0). The economic dimension of KOF index is derived from Dreher et al. [41] . We use some other variables, along with economic globalization to control other factors influenced economic growth. Table S2 in File S2 shows the variables, their proxies and source that they obtain.

We relied on the three main approaches to capture the effects of economic globalization on economic growth in OIC countries. The first one is the baseline specification (Eq. (1)) which estimates the effect of economic globalization on economic growth.

The second approach is to examine whether the effect of globalization on growth depends on the complementary policies in the form of level of human capital and financial development. To test, the interactions of economic globalization and financial development (KOF*FD) and economic globalization and human capital (KOF*HCS) are included as additional explanatory variables, apart from the standard variables used in the growth equation. The KOF, HCS and FD are included in the model individually as well for two reasons. First, the significance of the interaction term may be the result of the omission of these variables by themselves. Thus, in that way, it can be tested jointly whether these variables affect growth by themselves or through the interaction term. Second, to ensure that the interaction term did not proxy for KOF, HCS or FD, these variables were included in the regression independently.

In the third approach, in order to study the role of income level of countries on the growth effect of globalization, the countries are split based on income level. Accordingly, countries were classified into three groups: high-income countries (3), middle-income (21) and low-income (9) countries. Next, dummy variables were created for high-income (Dum 3), middle-income (Dum 2) and low-income (Dum 1) groups. Then interaction terms were created for dummy variables and KOF. These interactions will be added to the baseline specification.

Findings and Discussion

This section presents the empirical results of three approaches, based on the GMM -dynamic panel data; in Tables 1 – 3 . Table 1 presents a preliminary analysis on the effects of economic globalization on growth. Table 2 displays coefficient estimates obtained from the baseline specification, which used added two interaction terms of economic globalization and financial development and economic globalization and human capital. Table 3 reports the coefficients estimate from a specification that uses dummies to capture the impact of income level of OIC countries on the growth effect of globalization.

https://doi.org/10.1371/journal.pone.0087824.t001

https://doi.org/10.1371/journal.pone.0087824.t002

https://doi.org/10.1371/journal.pone.0087824.t003

The results in Table 1 indicate that economic globalization has positive impact on growth and the coefficient is significant at 1 percent level. The positive effect is consistent with the bulk of the existing empirical literature that support beneficial effect of globalization on economic growth [9] , [11] , [13] , [19] , [42] , [43] .

According to the theoretical literature, globalization enhances economic growth by allocating resources more efficiently as OIC countries that can be specialized in activities with comparative advantages. By increasing the size of markets through globalization, these countries can be benefited from economic of scale, lower cost of research and knowledge spillovers. It also augments capital in OICs as they provide a higher return to capital. It has raised productivity and innovation, supported the spread of knowledge and new technologies as the important factors in the process of development. The results also indicate that growth is enhanced by lower level of government expenditure, lower level of inflation, higher level of human capital, deeper financial development, more domestic investment and better institutions.

Table 2 represents that the coefficients on the interaction between the KOF, HCS and FD are statistically significant at 1% level and with the positive sign. The findings indicate that economic globalization not only directly promotes growth but also indirectly does via complementary reforms. On the other hand, the positive effect of economic globalization can be significantly enhanced if some complementary reforms in terms of human capital and financial development are undertaken.

In fact, the implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. However, countries with higher level of human capital can be better and faster to imitate and implement the transferred technologies. Besides, the financial openness brings along the knowledge and managerial for implementing the new technology. It can be helpful in improving the level of human capital in host countries. Moreover, the strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in developing countries. Overall, with higher level of human capital and stronger financial systems, the globalized countries benefit from the growth effect of globalization. The obtained results supported by previous studies in relative to financial and trade globalization such as [5] , [27] , [44] , [45] .

Table (3 ) shows that the estimated coefficients on KOF*dum3 and KOF*dum2 are statistically significant at the 5% level with positive sign. The KOF*dum1 is statistically significant with negative sign. It means that increase in economic globalization in high and middle-income countries boost economic growth but this effect is diverse for low-income countries. The reason might be related to economic structure of these countries that are not received to the initial condition necessary to be benefited from globalization. In fact, countries should be received to the appropriate income level to be benefited by globalization.

The diagnostic tests in tables 1 – 3 show that the estimated equation is free from simultaneity bias and second-order correlation. The results of Sargan test accept the null hypothesis that supports the validity of the instrument use in dynamic GMM.

Conclusions and Implications

Numerous researchers have investigated the impact of economic globalization on economic growth. Unfortunately, theoretical and the empirical literature have produced conflicting conclusions that need more investigation. The current study shed light on the growth effect of globalization by using a comprehensive index for globalization and applying a robust econometrics technique. Specifically, this paper assesses whether the growth effects of globalization depend on the complementary polices as well as income level of OIC countries.

Using a panel data of OIC countries over the 1980–2008 period, we draw three important conclusions from the empirical analysis. First, the coefficient measuring the effect of the economic globalization on growth was positive and significant, indicating that economic globalization affects economic growth of OIC countries in a positive way. Second, the positive effect of globalization on growth is increased in countries with higher level of human capital and deeper financial development. Finally, economic globalization does affect growth, whether the effect is beneficial depends on the level of income of each group. It means that economies should have some initial condition to be benefited from the positive effects of globalization. The results explain why some countries have been successful in globalizing world and others not.

The findings of our study suggest that public policies designed to integrate to the world might are not optimal for economic growth by itself. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

The policy implications of this study are relatively straightforward. Integrating to the global economy is only one part of the story. The other is how to benefits more from globalization. In this respect, the responsibility of policymakers is to improve the level of educated workers and strength of financial systems to get more opportunities from globalization. These economic policies are important not only in their own right, but also in helping developing countries to derive the benefits of globalization.

However, implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. In fact, countries with higher level of human capital can better and faster imitate and implement the transferred technologies. The higher level of human capital and certain skill of human capital determine whether technology is successfully absorbed across countries. This shows the importance of human capital in the success of countries in the globalizing world.

Financial openness in the form of FDI brings along the knowledge and managerial for implementing the new technology. It can be helpful in upgrading the level of human capital in host countries. Moreover, strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in OICs.

In addition, the results show that economic globalization does affect growth, whether the effect is beneficial depends on the level of income of countries. High and middle income countries benefit from globalization whereas low-income countries do not gain from it. As Birdsall [46] mentioned globalization is fundamentally asymmetric for poor countries, because their economic structure and markets are asymmetric. So, the risks of globalization hurt the poor more. The structure of the export of low-income countries heavily depends on primary commodity and natural resource which make them vulnerable to the global shocks.

The major research limitation of this study was the failure to collect data for all OIC countries. Therefore future research for all OIC countries would shed light on the relationship between economic globalization and economic growth.

Supporting Information

Sample of Countries.

https://doi.org/10.1371/journal.pone.0087824.s001

The Name and Definition of Indicators.

https://doi.org/10.1371/journal.pone.0087824.s002

Author Contributions

Conceived and designed the experiments: PS. Performed the experiments: PS. Analyzed the data: PS. Contributed reagents/materials/analysis tools: PS HSJ. Wrote the paper: PS HSJ.

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Effects of Economic Globalization

Globalization has led to increases in standards of living around the world, but not all of its effects are positive for everyone.

Social Studies, Economics, World History

Bangladesh Garment Workers

The garment industry in Bangladesh makes clothes that are then shipped out across the world. It employs as many as four million people, but the average worker earns less in a month than a U.S. worker earns in a day.

Photograph by Mushfiqul Alam

Put simply, globalization is the connection of different parts of the world. In economics, globalization can be defined as the process in which businesses, organizations, and countries begin operating on an international scale. Globalization is most often used in an economic context, but it also affects and is affected by politics and culture. In general, globalization has been shown to increase the standard of living in developing countries, but some analysts warn that globalization can have a negative effect on local or emerging economies and individual workers. A Historical View Globalization is not new. Since the start of civilization, people have traded goods with their neighbors. As cultures advanced, they were able to travel farther afield to trade their own goods for desirable products found elsewhere. The Silk Road, an ancient network of trade routes used between Europe, North Africa, East Africa, Central Asia, South Asia, and the Far East, is an example of early globalization. For more than 1,500 years, Europeans traded glass and manufactured goods for Chinese silk and spices, contributing to a global economy in which both Europe and Asia became accustomed to goods from far away. Following the European exploration of the New World, globalization occurred on a grand scale; the widespread transfer of plants, animals, foods, cultures, and ideas became known as the Columbian Exchange. The Triangular Trade network in which ships carried manufactured goods from Europe to Africa, enslaved Africans to the Americas, and raw materials back to Europe is another example of globalization. The resulting spread of slavery demonstrates that globalization can hurt people just as easily as it can connect people. The rate of globalization has increased in recent years, a result of rapid advancements in communication and transportation. Advances in communication enable businesses to identify opportunities for investment. At the same time, innovations in information technology enable immediate communication and the rapid transfer of financial assets across national borders. Improved fiscal policies within countries and international trade agreements between them also facilitate globalization. Political and economic stability facilitate globalization as well. The relative instability of many African nations is cited by experts as one of the reasons why Africa has not benefited from globalization as much as countries in Asia and Latin America. Benefits of Globalization Globalization provides businesses with a competitive advantage by allowing them to source raw materials where they are inexpensive. Globalization also gives organizations the opportunity to take advantage of lower labor costs in developing countries, while leveraging the technical expertise and experience of more developed economies. With globalization, different parts of a product may be made in different regions of the world. Globalization has long been used by the automotive industry , for instance, where different parts of a car may be manufactured in different countries. Businesses in several different countries may be involved in producing even seemingly simple products such as cotton T-shirts. Globalization affects services, too. Many businesses located in the United States have outsourced their call centers or information technology services to companies in India. As part of the North American Free Trade Agreement (NAFTA), U.S. automobile companies relocated their operations to Mexico, where labor costs are lower. The result is more jobs in countries where jobs are needed, which can have a positive effect on the national economy and result in a higher standard of living. China is a prime example of a country that has benefited immensely from globalization. Another example is Vietnam, where globalization has contributed to an increase in the prices for rice, lifting many poor rice farmers out of poverty. As the standard of living increased, more children of poor families left work and attended school. Consumers benefit also. In general, globalization decreases the cost of manufacturing . This means that companies can offer goods at a lower price to consumers. The average cost of goods is a key aspect that contributes to increases in the standard of living. Consumers also have access to a wider variety of goods. In some cases, this may contribute to improved health by enabling a more varied and healthier diet; in others, it is blamed for increases in unhealthy food consumption and diabetes. Downsides Not everything about globalization is beneficial. Any change has winners and losers, and the people living in communities that had been dependent on jobs outsourced elsewhere often suffer. Effectively, this means that workers in the developed world must compete with lower-cost markets for jobs; unions and workers may be unable to defend against the threat of corporations that offer the alternative between lower pay or losing jobs to a supplier in a less expensive labor market. The situation is more complex in the developing world, where economies are undergoing rapid change. Indeed, the working conditions of people at some points in the supply chain are deplorable. The garment industry in Bangladesh, for instance, employs an estimated four million people, but the average worker earns less in a month than a U.S. worker earns in a day. In 2013, a textile factory building collapsed, killing more than 1,100 workers. Critics also suggest that employment opportunities for children in poor countries may increase negative impacts of child labor and lure children of poor families away from school. In general, critics blame the pressures of globalization for encouraging an environment that exploits workers in countries that do not offer sufficient protections. Studies also suggest that globalization may contribute to income disparity and inequality between the more educated and less educated members of a society. This means that unskilled workers may be affected by declining wages, which are under constant pressure from globalization. Into the Future Regardless of the downsides, globalization is here to stay. The result is a smaller, more connected world. Socially, globalization has facilitated the exchange of ideas and cultures, contributing to a world view in which people are more open and tolerant of one another.

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Trade has changed the world economy

Trade has grown remarkably over the last century.

One of the most important developments of the last century has been the integration of national economies into a global economic system. This process of integration, often called globalization, has resulted in a remarkable growth in trade between countries.

The chart here shows the growth of world exports over more than the last two centuries. These estimates are in constant prices (i.e. have been adjusted to account for inflation) and are indexed at 1913 values.

The chart shows an extraordinary growth in international trade over the last couple of centuries: Exports today are more than 40 times larger than in 1913.

You can switch to a logarithmic scale under ‘Settings’. This will help you see that, over the long run, growth has roughly followed an exponential path.

The increase in trade has even outpaced economic growth

The chart above shows how much more trade we have today relative to a century ago. But what about trade relative to total economic output?

Over the last couple of centuries the world economy has experienced sustained positive economic growth , so looking at changes in trade relative to GDP offers another interesting perspective.

The next chart plots the value of traded goods relative to GDP (i.e. the value of merchandise trade as a share of global economic output).

Up to 1870, the sum of worldwide exports accounted for less than 10% of global output. Today, the value of exported goods around the world is around 25%. This shows that over the last hundred years, the growth in trade has even outpaced rapid economic growth.

Trade expanded in two waves

The first "wave of globalization" started in the 19th century, the second one after ww2.

The following visualization presents a compilation of available trade estimates, showing the evolution of world exports and imports as a share of global economic output .

This metric (the ratio of total trade, exports plus imports, to global GDP) is known as the “openness index”. The higher the index, the higher the influence of trade transactions on global economic activity. 1

As we can see, until 1800 there was a long period characterized by persistently low international trade – globally the index never exceeded 10% before 1800. This then changed over the course of the 19th century, when technological advances triggered a period of marked growth in world trade – the so-called “first wave of globalization”.

This first wave came to an end with the beginning of World War I, when the decline of liberalism and the rise of nationalism led to a slump in international trade. In the chart we see a large drop in the interwar period.

After World War II trade started growing again. This new – and ongoing – wave of globalization has seen international trade grow faster than ever before. Today the sum of exports and imports across nations amounts to more than 50% of the value of total global output.

Before the first wave of globalization, trade was driven mostly by colonialism

Over the early modern period, transoceanic flows of goods between empires and colonies accounted for an important part of international trade. The following visualizations provide a comparison of intercontinental trade, in per capita terms, for different countries.

As we can see, intercontinental trade was very dynamic, with volumes varying considerably across time and from empire to empire.

Leonor Freire Costa, Nuno Palma, and Jaime Reis, who compiled and published the original data shown here, argue that trade, also in this period, had a substantial positive impact on the economy. 2

The first wave of globalization was marked by the rise and collapse of intra-European trade

The following visualization shows a detailed overview of Western European exports by destination. Figures correspond to export-to-GDP ratios (i.e. the sum of the value of exports from all Western European countries, divided by the total GDP in this region). You can use “Settings” to switch to a relative view and see the proportional contribution of each region to total Western European exports.

This chart shows that growth in Western European trade throughout the 19th century was largely driven by trade within the region: In the period 1830-1900 intra-European exports went from 1% of GDP to 10% of GDP, and this meant that the relative weight of intra-European exports doubled over the period. However, this process of European integration then collapsed sharply in the interwar period.

After the Second World War trade within Europe rebounded, and from the 1990s onwards exceeded the highest levels of the first wave of globalization. In addition, Western Europe then started to increasingly trade with Asia, the Americas, and to a smaller extent Africa and Oceania.

The next graph, using data from Broadberry and O'Rourke (2010) 3 , shows another perspective on the integration of the global economy and plots the evolution of three indicators measuring integration across different markets – specifically goods, labor, and capital markets.

The indicators in this chart are indexed, so they show changes relative to the levels of integration observed in 1900. This gives us another perspective on how quickly global integration collapsed with the two World Wars. 4

The second wave of globalization was enabled by technology

The worldwide expansion of trade after the Second World War was largely possible because of reductions in transaction costs stemming from technological advances, such as the development of commercial civil aviation, the improvement of productivity in the merchant marines, and the democratization of the telephone as the main mode of communication. The visualization shows how, at the global level, costs across these three variables have been going down since 1930.

Reductions in transaction costs impacted not only the volumes of trade but also the types of exchanges that were possible and profitable.

The first wave of globalization was characterized by inter-industry trade. This means that countries exported goods that were very different from what they imported – England exchanged machines for Australian wool and Indian tea. As transaction costs went down, this changed. In the second wave of globalization, we are seeing a rise in intra -industry trade (i.e. the exchange of broadly similar goods and services is becoming more and more common). France, for example, now both imports and exports machines to and from Germany.

The following visualization, from the UN World Development Report (2009) , plots the fraction of total world trade that is accounted for by intra-industry trade, by type of goods. As we can see, intra-industry trade has been going up for primary, intermediate, and final goods.

This pattern of trade is important because the scope for specialization increases if countries are able to exchange intermediate goods (e.g. auto parts) for related final goods (e.g. cars).

Trade and trade partners by country

Above, we examined the broad global trends over the last two centuries. Let's now examine country-level trends over this long and dynamic period.

This chart plots estimates of the value of trade in goods, relative to total economic activity (i.e. export-to-GDP ratios).

These historical estimates obviously come with a large margin of error (in the measurement section below we discuss the data limitations); yet they offer an interesting perspective.

You can edit the countries and regions selected. Each country tells a different story. 6

In the next chart we plot, country by country, the regional breakdown of exports. India is shown by default, but you can edit the countries and regions shown.

When switching to displaying relative values under ‘Settings’, we see the proportional contribution of purchases from each region. For example, we see that more than a third of Indian exports went to Asian countries in recent decades.

This gives us an interesting perspective on the changing nature of trade partnerships. In India, we see the rising importance of trade with Africa—a pattern that we discuss in more detail below .

Trade around the world today

How much do countries trade, trade openness around the world.

The metric trade as a share of GDP gives us an idea of global integration by capturing all incoming and outgoing transactions of a country.

The charts shows that countries differ a lot in the extent to which they engage in trade. Trade, for example, is much less important to the US economy than for other rich countries.

If you press the play button on the map, you can see changes over time. This reveals that, despite the great variation between countries, there is a common trend: over the last couple of decades trade openness has gone up in most countries.

Exports and imports in real dollars

Expressing the value of trade as a share of GDP tells us the importance of trade in relation to the size of economic activity. Let's now take a look at trade in monetary terms – this tells us the importance of trade in absolute, rather than relative terms.

The chart shows the value of exports (goods plus services) in dollars, country by country.

The main takeaway here is that the trend towards more trade is more pronounced than in the charts showing shares of GDP. This is not surprising: most countries today produce more than a couple of decades ago , and at the same time they trade more of what they produce. 7

What do countries trade?

Trade in goods vs. trade in services.

Trade transactions include goods (tangible products that are physically shipped across borders by road, rail, water, or air) and services (intangible commodities, such as tourism, financial services, and legal advice).

Many traded services make merchandise trade easier or cheaper—for example, shipping services, or insurance and financial services.

Trade in goods has been happening for millennia , while trade in services is a relatively recent phenomenon.

In some countries services are today an important driver of trade: in the UK services account for around half of all exports; and in the Bahamas, almost all exports are services.

In other countries, such as Nigeria and Venezuela, services account for a small share of total exports.

Globally, trade in goods accounts for the majority of trade transactions. But as this chart shows, the share of services in total global exports has slightly increased in recent decades. 8

How are trade partnerships changing?

Bilateral trade is becoming increasingly common.

If we consider all pairs of countries that engage in trade around the world, we find that in the majority of cases, there is a bilateral relationship today: most countries that export goods to a country also import goods from the same country.

The interactive visualization shows this. 9 In the chart, all possible country pairs are partitioned into three categories: the top portion represents the fraction of country pairs that do not trade with one another; the middle portion represents those that trade in both directions (they export to one another); and the bottom portion represents those that trade in one direction only (one country imports from, but does not export to, the other country).

As we can see, bilateral trade is becoming increasingly common (the middle portion has grown substantially). However, many countries still do not trade with each other at all.

South-South trade is becoming increasingly important

The next visualization here shows the share of world merchandise trade that corresponds to exchanges between today's rich countries and the rest of the world.

The 'rich countries' in this chart are: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States. 'Non-rich countries' are all the other countries in the world.

As we can see, up until the Second World War, the majority of trade transactions involved exchanges between this small group of rich countries. But this has changed quickly over the last couple of decades, and today, trade between non-rich countries is just as important as trade between rich countries.

In the past two decades, China has been a key driver of this dynamic: the UN Human Development Report (2013) estimates that between 1992 and 2011, China's trade with Sub-Saharan Africa rose from $1 billion to more than $140 billion. 10

The majority of preferential trade agreements are between emerging economies

The last few decades have not only seen an increase in the volume of international trade, but also an increase in the number of preferential trade agreements through which exchanges take place. A preferential trade agreement is a trade pact that reduces tariffs between the participating countries for certain products.

The visualization here shows the evolution of the cumulative number of preferential trade agreements in force worldwide, according to the World Trade Organization (WTO). These numbers include notified and non-notified preferential agreements (the source reports that only about two-thirds of the agreements currently in force have been notified to the WTO) and are disaggregated by country groups.

This figure shows the increasingly important role of trade between developing countries (South-South trade), vis-a-vis trade between developed and developing countries (North-South trade). In the late 1970s, North-South agreements accounted for more than half of all agreements – in 2010, they accounted for about one-quarter. Today, the majority of preferential trade agreements are between developing economies.

Trading patterns have been changing quickly in middle-income countries

An important change in the composition of exported goods in these countries has accompanied the increase in trade among emerging economies over the last half century.

The next visualization plots the share of food exports in each country's total exported merchandise. These figures, produced by the World Bank, correspond to the Standard International Trade Classification, in which 'food' includes, among other goods, live animals, beverages, tobacco, coffee, oils, and fats.

Two points stand out. First, the relative importance of food exports has substantially decreased in most countries since the 1960s (although globally, it has gone up slightly more recently). Second, this decrease has been largest in middle-income countries, particularly in Latin America.

Regarding levels, as one would expect, in high-income countries, food still accounts for a much smaller share of merchandise exports than in most low- and middle-income-countries.

Trade generates efficiency gains

The raw correlation between trade and growth.

Over the last couple of centuries, the world economy has experienced sustained positive economic growth , and over the same period, this process of economic growth has been accompanied by even faster growth in global trade .

In a similar way, if we look at country-level data from the last half century we find that there is also a correlation between economic growth and trade: countries with higher rates of GDP growth also tend to have higher rates of growth in trade as a share of output. This basic correlation is shown in the chart here, where we plot the average annual change in real GDP per capita, against growth in trade (average annual change in value of exports as a share of GDP). 11

Is this statistical association between economic output and trade causal?

Among the potential growth-enhancing factors that may come from greater global economic integration are: competition (firms that fail to adopt new technologies and cut costs are more likely to fail and be replaced by more dynamic firms); economies of scale (firms that can export to the world face larger demand, and under the right conditions, they can operate at larger scales where the price per unit of product is lower); learning and innovation (firms that trade gain more experience and exposure to develop and adopt technologies and industry standards from foreign competitors). 12

Are these mechanisms supported by the data? Let's take a look at the available empirical evidence.

Evidence from cross-country differences in trade, growth, and productivity

When it comes to academic studies estimating the impact of trade on GDP growth, the most cited paper is Frankel and Romer (1999). 13

In this study, Frankel and Romer used geography as a proxy for trade to estimate the impact of trade on growth. This is a classic example of the so-called instrumental variables approach . The idea is that a country's geography is fixed, and mainly affects national income through trade. So if we observe that a country's distance from other countries is a powerful predictor of economic growth (after accounting for other characteristics), then the conclusion is drawn that it must be because trade has an effect on economic growth. Following this logic, Frankel and Romer find evidence of a strong impact of trade on economic growth.

Other papers have applied the same approach to richer cross-country data, and they have found similar results. A key example is Alcalá and Ciccone (2004). 14

This body of evidence suggests trade is indeed one of the factors driving national average incomes (GDP per capita) and macroeconomic productivity (GDP per worker) over the long run. 15

Evidence from changes in labor productivity at the firm level

If trade is causally linked to economic growth, we would expect that trade liberalization episodes also lead to firms becoming more productive in the medium and even short run. There is evidence suggesting this is often the case.

Pavcnik (2002) examined the effects of liberalized trade on plant productivity in the case of Chile, during the late 1970s and early 1980s. She found a positive impact on firm productivity in the import-competing sector. She also found evidence of aggregate productivity improvements from the reshuffling of resources and output from less to more efficient producers. 16

Bloom, Draca, and Van Reenen (2016) examined the impact of rising Chinese import competition on European firms over the period 1996-2007 and obtained similar results. They found that innovation increased more in those firms most affected by Chinese imports. They also found evidence of efficiency gains through two related channels: innovation increased and new existing technologies were adopted within firms, and aggregate productivity also increased because employment was reallocated towards more technologically advanced firms. 17

Trade does not only increase efficiency gains

Overall, the available evidence suggests that trade liberalization does improve economic efficiency. This evidence comes from different political and economic contexts and includes both micro and macro measures of efficiency.

This result is important because it shows that there are gains from trade. But of course, efficiency is not the only relevant consideration here. As we discuss in a companion article , the efficiency gains from trade are not generally equally shared by everyone. The evidence from the impact of trade on firm productivity confirms this: "reshuffling workers from less to more efficient producers" means closing down some jobs in some places. Because distributional concerns are real it is important to promote public policies – such as unemployment benefits and other safety-net programs – that help redistribute the gains from trade.

Trade has distributional consequences

The conceptual link between trade and household welfare.

When a country opens up to trade, the demand and supply of goods and services in the economy shift. As a consequence, local markets respond, and prices change. This has an impact on households, both as consumers and as wage earners.

The implication is that trade has an impact on everyone. It's not the case that the effects are restricted to workers from industries in the trade sector; or to consumers who buy imported goods. The effects of trade extend to everyone because markets are interlinked, so imports and exports have knock-on effects on all prices in the economy, including those in non-traded sectors.

Economists usually distinguish between "general equilibrium consumption effects" (i.e. changes in consumption that arise from the fact that trade affects the prices of non-traded goods relative to traded goods) and "general equilibrium income effects" (i.e. changes in wages that arise from the fact that trade has an impact on the demand for specific types of workers, who could be employed in both the traded and non-traded sectors).

Considering all these complex interrelations, it's not surprising that economic theories predict that not everyone will benefit from international trade in the same way. The distribution of the gains from trade depends on what different groups of people consume, and which types of jobs they have, or could have. 18

The link between trade, jobs and wages

Evidence from chinese imports and their impact on factory workers in the us.

The most famous study looking at this question is Autor, Dorn and Hanson (2013): "The China syndrome: Local labor market effects of import competition in the United States". 19

In this paper, Autor and coauthors examined how local labor markets changed in the parts of the country most exposed to Chinese competition. They found that rising exposure increased unemployment, lowered labor force participation, and reduced wages. Additionally, they found that claims for unemployment and healthcare benefits also increased in more trade-exposed labor markets.

The visualization here is one of the key charts from their paper. It's a scatter plot of cross-regional exposure to rising imports, against changes in employment. Each dot is a small region (a 'commuting zone' to be precise). The vertical position of the dots represents the percent change in manufacturing employment for the working-age population, and the horizontal position represents the predicted exposure to rising imports (exposure varies across regions depending on the local weight of different industries).

The trend line in this chart shows a negative relationship: more exposure goes along with less employment. There are large deviations from the trend (there are some low-exposure regions with big negative changes in employment); but the paper provides more sophisticated regressions and robustness checks, and finds that this relationship is statistically significant.

This result is important because it shows that the labor market adjustments were large. Many workers and communities were affected over a long period of time. 20

But it's also important to keep in mind that Autor and colleagues are only giving us a partial perspective on the total effect of trade on employment. In particular, comparing changes in employment at the regional level misses the fact that firms operate in multiple regions and industries at the same time. Indeed, Ildikó Magyari found evidence suggesting the Chinese trade shock provided incentives for US firms to diversify and reorganize production. 21

So companies that outsourced jobs to China often ended up closing some lines of business, but at the same time expanded other lines elsewhere in the US. This means that job losses in some regions subsidized new jobs in other parts of the country.

On the whole, Magyari finds that although Chinese imports may have reduced employment within some establishments, these losses were more than offset by gains in employment within the same firms in other places. This is no consolation to people who lost their jobs. But it is necessary to add this perspective to the simplistic story of "trade with China is bad for US workers".

Evidence from the expansion of trade in India and the impact on poverty reductions

Another important paper in this field is Topalova (2010): "Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India". 22

In this paper, Topalova examines the impact of trade liberalization on poverty across different regions in India, using the sudden and extensive change in India's trade policy in 1991. She finds that rural regions that were more exposed to liberalization experienced a slower decline in poverty and lower consumption growth.

Analyzing the mechanisms underlying this effect, Topalova finds that liberalization had a stronger negative impact among the least geographically mobile at the bottom of the income distribution and in places where labor laws deterred workers from reallocating across sectors.

The evidence from India shows that (i) discussions that only look at "winners" in poor countries and "losers" in rich countries miss the point that the gains from trade are unequally distributed within both sets of countries; and (ii) context-specific factors, like worker mobility across sectors and geographic regions, are crucial to understand the impact of trade on incomes.

Evidence from other studies

• Donaldson (2018) uses archival data from colonial India to estimate the impact of India’s vast railroad network. He finds railroads increased trade, and in doing so they increased real incomes (and reduced income volatility). 23
• Porto (2006) looks at the distributional effects of Mercosur on Argentine families, and finds this regional trade agreement led to benefits across the entire income distribution. He finds the effect was progressive: poor households gained more than middle-income households because prior to the reform, trade protection benefitted the rich disproportionately. 24
• Trefler (2004) looks at the Canada-US Free Trade Agreement and finds there was a group who bore "adjustment costs" (displaced workers and struggling plants) and a group who enjoyed "long-run gains" (consumers and efficient plants). 25

The link between trade and the cost of living

The fact that trade negatively affects labor market opportunities for specific groups of people does not necessarily imply that trade has a negative aggregate effect on household welfare. This is because, while trade affects wages and employment, it also affects the prices of consumption goods. So households are affected both as consumers and as wage earners.

Most studies focus on the earnings channel and try to approximate the impact of trade on welfare by looking at how much wages can buy, using as a reference the changing prices of a fixed basket of goods.

This approach is problematic because it fails to consider welfare gains from increased product variety, and obscures complicated distributional issues such as the fact that poor and rich individuals consume different baskets so they benefit differently from changes in relative prices. 26

Ideally, studies looking at the impact of trade on household welfare should rely on fine-grained data on prices, consumption, and earnings. This is the approach followed in Atkin, Faber, and Gonzalez-Navarro (2018): "Retail globalization and household welfare: Evidence from Mexico". 27

Atkin and coauthors use a uniquely rich dataset from Mexico, and find that the arrival of global retail chains led to reductions in the incomes of traditional retail sector workers, but had little impact on average municipality-level incomes or employment; and led to lower costs of living for both rich and poor households.

The chart here shows the estimated distribution of total welfare gains across the household income distribution (the light-gray lines correspond to confidence intervals). These are proportional gains expressed as a percent of initial household income.

As we can see, there is a net positive welfare effect across all income groups; but these improvements in welfare are regressive, in the sense that richer households gain proportionally more (about 7.5 percent gain compared to 5 percent). 28

Evidence from other countries confirms this is not an isolated case – the expenditure channel really seems to be an important and understudied source of household welfare. Giuseppe Berlingieri, Holger Breinlich, Swati Dhingra, for example, investigated the consumer benefits from trade agreements implemented by the EU between 1993 and 2013; and they found that these trade agreements increased the quality of available products, which translated into a cumulative reduction in consumer prices equivalent to savings of €24 billion per year for EU consumers. 29

Implications of trade’s distributional effects

The available evidence shows that, for some groups of people, trade has a negative effect on wages and employment opportunities; at the same time, it has a large positive effect via lower consumer prices and increased product availability.

Two points are worth emphasizing.

For some households, the net effect is positive. But for some households that's not the case. In particular, workers who lose their jobs can be affected for extended periods of time, so the positive effect via lower prices is not enough to compensate them for the reduction in earnings.

On the whole, if we aggregate changes in welfare across households, the net effect is usually positive. But this is hardly a consolation for the worse off.

This highlights a complex reality: There are aggregate gains from trade , but there are also real distributional concerns. Even if trade is not a major driver of income inequalities , it's important to keep in mind that public policies, such as unemployment benefits and other safety-net programs, can and should help redistribute the gains from trade.

Explaining trade patterns: Theory and Evidence

Comparative advantage, theory: what is 'comparative advantage' and why does it matter to understand trade.

In economic theory, the 'economic cost' – or the 'opportunity cost' – of producing a good is the value of everything you need to give up in order to produce that good.

Economic costs include physical inputs (the value of the stuff you use to produce the good), plus forgone opportunities (when you allocate scarce resources to a task, you give up alternative uses of those resources).

A country or a person is said to have a 'comparative advantage' if it can produce something at a lower opportunity cost than its trade partners.

The forgone opportunities of production are key to understanding this concept. It is precisely this that distinguishes absolute advantage from comparative advantage.

To see the difference between comparative and absolute advantage, consider a commercial aviation pilot and a baker. Suppose the pilot is an excellent chef, and she can bake just as well, or even better than the baker. In this case, the pilot has an absolute advantage in both tasks. Yet the baker probably has a comparative advantage in baking, because the opportunity cost of baking is much higher for the pilot.

The freely available economics textbook The Economy: Economics for a Changing World explains this as follows: "A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country’s cost to produce the same two goods."

At the individual level, comparative advantage explains why you might want to delegate tasks to someone else, even if you can do those tasks better and faster than them. This may sound counterintuitive, but it is not: If you are good at many things, it means that investing time in one task has a high opportunity cost, because you are not doing the other amazing things you could be doing with your time and resources. So, at least from an efficiency point of view, you should specialize on what you are best at, and delegate the rest.

The same logic applies to countries. Broadly speaking, the principle of comparative advantage postulates that all nations can gain from trade if each specializes in producing what they are relatively more efficient at producing, and imports the rest: “do what you do best, import the rest”. 30

In countries with a relative abundance of certain factors of production, the theory of comparative advantage predicts that they will export goods that rely heavily upon those factors: a country typically has a comparative advantage in those goods that use its abundant resources. Colombia exports bananas to Europe because it has comparatively abundant tropical weather.

Is there empirical support for comparative-advantage theories of trade?

The empirical evidence suggests that the principle of comparative advantage does help explain trade patterns. Bernhofen and Brown (2004) 31 , for instance, provide evidence using the experience of Japan. Specifically, they exploit Japan’s dramatic nineteenth-century move from a state of near complete isolation to wide trade openness.

The graph here shows the price changes of the key tradable goods after the opening up to trade. It presents a scatter diagram of the net exports in 1869 graphed in relation to the change in prices from 1851–53 to 1869. As we can see, this is consistent with the theory: after opening to trade, the relative prices of major exports such as silk increased (Japan exported what was cheap for them to produce and which was valuable abroad), while the relative price of imports such as sugar declined (they imported what was relatively more difficult for them to produce, but was cheap abroad).

Trade diminishes with distance

The resistance that geography imposes on trade has long been studied in the empirical economics literature – and the main conclusion is that trade intensity is strongly linked to geographic distance.

The visualization, from Eaton and Kortum (2002), graphs 'normalized import shares' against distance. 32 Each dot represents a country pair from a set of 19 OECD countries, and both the vertical and horizontal axes are expressed on logarithmic scales.

The 'normalized import shares' in the vertical axis provide a measure of how much each country imports from different partners (see the paper for details on how this is calculated and normalized), while the distance in the horizontal axis corresponds to the distance between central cities in each country (see the paper and references therein for details on the list of cities). As we can see, there is a strong negative relationship. Trade diminishes with distance. Through econometric modeling, the paper shows that this relationship is not just a correlation driven by other factors: their findings suggest that distance imposes a significant barrier to trade.

The fact that trade diminishes with distance is also corroborated by data on trade intensity within countries. The visualization here shows, through a series of maps, the geographic distribution of French firms that export to France's neighboring countries. The colors reflect the percentage of firms that export to each specific country.

As we can see, the share of firms exporting to each of the corresponding neighbors is the largest close to the border. The authors also show in the paper that this pattern holds for the value of individual-firm exports – trade value decreases with distance to the border.

Institutions

Conducting international trade requires both financial and non-financial institutions to support transactions. Some of these institutions are fairly obvious (e.g. law enforcement); but some are less obvious. For example, the evidence shows that producers in exporting countries often need credit in order to engage in trade.

The scatter plot, from Manova (2013), shows the correlation between levels in private credit (specifically exporters’ private credit as a share of GDP) and exports (average log bilateral exports across destinations and sectors). 34 As can be seen, financially developed economies – those with more dynamic private credit markets – typically outperform exporters with less evolved financial institutions.

Other studies have shown that country-specific institutions, like the knowledge of foreign languages, for instance, are also important to promote foreign relative to domestic trade. 35

Increasing returns to scale

The concept of comparative advantage predicts that if all countries had identical endowments and institutions, there would be little incentive for specialization because the opportunity cost of producing any good would be the same in every country.

So you may wonder: why is it then the case that in the last few years, we have seen such rapid growth in intra-industry trade between rich countries?

The increase in intra-industry between rich countries seems paradoxical under the light of comparative advantage because in recent decades we have seen convergence in key factors, such as human capital , across these countries.

The solution to the paradox is actually not very complicated: Comparative advantage is one, but not the only force driving incentives to specialization and trade.

Several economists, most notably Paul Krugman, have developed theories of trade in which trade is not due to differences between countries, but instead due to "increasing returns to scale" – an economic term used to denote a technology in which producing extra units of a good becomes cheaper if you operate at a larger scale.

The idea is that specialization allows countries to reap greater economies of scale (i.e. to reduce production costs by focusing on producing large quantities of specific products), so trade can be a good idea even if the countries do not differ in endowments, including culture and institutions.

These models of trade, often referred to as “New Trade Theory”, are helpful in explaining why in the last few years we have seen such rapid growth in two-way exchanges of goods within industries between developed nations.

In a much-cited paper, Evenett and Keller (2002) show that both factor endowments and increasing returns help explain production and trade patterns around the world. 36

You can learn more about New Trade Theory, and the empirical support behind it, in Paul Krugman's Nobel lecture .

Measurement and data quality

There are dozens of official sources of data on international trade, and if you compare these different sources, you will find that they do not agree with one another. Even if you focus on what seems to be the same indicator for the same year in the same country, discrepancies are large.

Such differences between sources can also be found in rich countries where statistical agencies tend to follow international reporting guidelines more closely.

There are also large bilateral discrepancies within sources: the value of goods that country A exports to country B can be more than the value of goods that country B imports from country A.

Here we explain how international trade data is collected and processed, and why there are such large discrepancies.

What data is available?

The data hubs from several large international organizations publish and maintain extensive cross-country datasets on international trade. Here's a list of the most important ones:

• World Bank Open Data
• WTO Statistics
• UN Comtrade
• UNCTAD World Integrated Trade Solutions

In addition to these sources, there are also many other academic projects that publish data on international trade. These projects tend to rely on data from one or more of the sources above, and they typically process and merge series in order to improve coverage and consistency. Three important sources are:

• The Correlates of War Project . 37
• The NBER-United Nations Trade Dataset Project .
• The CEPII Bilateral Trade and Gravity Data Project . 38

How large are the discrepancies between sources?

In the visualization here, we compare the data published by several of the sources listed above, country by country, from 1955 to today.

For each country, we exclude trade in services, and we focus only on estimates of the total value of exported goods, expressed as shares of GDP. 39

As this chart clearly shows, different data sources often tell very different stories. If you change the country or region shown you will see that this is true, to varying degrees, across all countries and years.

Constructing this chart was demanding. It required downloading trade data from many different sources, collecting the relevant series, and then standardizing them so that the units of measure and the geographical territories were consistent.

All series, except the two long-run series from CEPII and NBER-UN, were produced from data published by the sources in current US dollars and then converted to GDP shares using a unique source (World Bank).

So, if all series are in the same units (share of national GDP) and they measure the same thing (value of goods exported from one country to the rest of the world), what explains the differences?

Let's dig deeper to understand what's going on.

Why doesn't the data add up?

Differences in guidelines used by countries to record and report trade data.

Broadly speaking, there are two main approaches used to estimate international merchandise trade:

• The first approach relies on estimating trade from customs records , often complementing or correcting figures with data from enterprise surveys and administrative records associated with taxation. The main manual providing guidelines for this approach is the International Merchandise Trade Statistics Manual (IMTS).
• The second approach relies on estimating trade from macroeconomic data , typically National Accounts . The main manual providing guidelines for this approach is the Balance of Payments and International Investment Position Manual (BPM6), which was drafted in parallel with the 2008 System of National Accounts of the United Nations (SNA 2008). The idea behind this approach is to record changes in economic ownership. 40

Under these two approaches, it is common to distinguish between 'traded merchandise' and 'traded goods'. The distinction is often made because goods simply being transported through a country (i.e., goods in transit) are not considered to change a country's stock of material resources and are hence often excluded from the more narrow concept of 'merchandise trade'.

Also, adding to the complexity, countries often rely on measurement protocols developed alongside approaches and concepts that are not perfectly compatible to begin with. In Europe, for example, countries use the 'Compilers guide on European statistics on international trade in goods'.

Measurement error and other inconsistencies

Even when two sources rely on the same broad accounting approach, discrepancies arise because countries fail to adhere perfectly to the protocols.

In theory, for example, the exports of country A to country B should mirror the imports of country B from country A. But in practice this is rarely the case because of differences in valuation. According to the BPM6, imports, and exports should be recorded in the balance of payments accounts on a ' free on board (FOB) basis', which means using prices that include all charges up to placing the goods on board a ship at the port of departure. Yet many countries stick to FOB values only for exports, and use CIF values for imports (CIF stands for 'Cost, Insurance and Freight', and includes the costs of transportation). 41

The chart here gives you an idea of how large import-export asymmetries are. Shown are the differences between the value of goods that each country reports exporting to the US, and the value of goods that the US reports importing from the same countries. For example, for China, the figure in the chart corresponds to the “Value of merchandise imports in the US from China” minus the “Value of merchandise exports from China to the US”.

The differences in the chart here, which are both positive and negative, suggest that there is more going on than differences in FOB vs. CIF values. If all asymmetries were coming from FOB-CIF differences, then we should only see positive values in the chart (recall that, unlike FOB values, CIF values include the cost of transportation, so CIF values are larger).

What else may be going on here?

Another common source of measurement error relates to the inconsistent attribution of trade partners. An example is failure to follow the guidelines on how to treat goods passing through intermediary countries for processing or merchanting purposes. As global production chains become more complex, countries find it increasingly difficult to unambiguously establish the origin and final destination of merchandise, even when rules are established in the manuals. 42

And there are still more potential sources of discrepancies. For example differences in customs and tax regimes, and differences between "general" and "special" trade systems (i.e. differences between statistical territories and actual country borders, which do not often coincide because of things like 'custom free zones'). 43

Even when two sources have identical trade estimates, inconsistencies in published data can arise from differences in exchange rates. If a dataset reports cross-country trade data in US dollars, estimates will vary depending on the exchange rates used. Different exchange rates will lead to conflicting estimates, even if figures in local currency units are consistent.

A checklist for comparing sources

Asymmetries in international trade statistics are large and arise for a variety of reasons. These include conceptual inconsistencies across measurement standards and inconsistencies in the way countries apply agreed-upon protocols. Here's a checklist of issues to keep in mind when comparing sources.

• Differences in underlying records: is trade measured from National Accounts data rather than directly from custom or tax records?
• Differences in import and export valuations: are transactions valued at FOB or CIF prices?
• Inconsistent attribution of trade partners: how is the origin and final destination of merchandise established?
• Difference between 'goods' and 'merchandise': how are re-importing, re-exporting, and intermediary merchanting transactions recorded?
• Exchange rates: how are values converted from local currency units to the currency that allows international comparisons (most often the US-$)?
• Differences between 'general' and 'special' trade system: how is trade recorded for custom-free zones?
• Other issues: Time of recording, confidentiality policies, product classification, deliberate mis-invoicing for illicit purposes.

Many organizations producing trade data have long recognized these factors. Indeed, international organizations often incorporate corrections in an attempt to improve data quality.

The OECD's Balanced International Merchandise Trade Statistics , for example, uses its own approach to correct and reconcile international merchandise trade statistics. 44

The corrections applied in the OECD's 'balanced' series make this the best source for cross-country comparisons. However, this dataset has low coverage across countries, and it only goes back to 2011. This is an important obstacle since the complex adjustments introduced by the OECD imply we can't easily improve coverage by appending data from other sources. At Our World in Data we have chosen to rely on CEPII as the main source for exploring long-run changes in international trade, but we also rely on World Bank and OECD data for up-to-date cross-country comparisons.

There are two key lessons from all of this. The first lesson is that, for most users of trade data out there, there is no obvious way of choosing between sources. And the second lesson is that, because of statistical glitches, researchers and policymakers should always take analyses of trade data with a pinch of salt. For example, in a recent high-profile report , researchers attributed mismatches in bilateral trade data to illicit financial flows through trade mis-invoicing (or trade-based money laundering). As we show here, this interpretation of the data is not appropriate, since mismatches in the data can, and often do arise from measurement inconsistencies rather than malfeasance. 45

Hopefully, the discussion and checklist above can help researchers better interpret and choose between conflicting data sources.

Interactive charts on Trade and Globalization

The openness index, when calculated for the world as a whole, includes double-counting of transactions: When country A sells goods to country B, this shows up in the data both as an import (B imports from A) and as an export (A sells to B).

Indeed, if you compare the chart showing the global trade openness index and the chart showing global merchandise exports as a share of GDP , you find that the former is almost twice as large as the latter.

Why is the global openness index not exactly twice the value reported in the chart plotting global merchandise exports? There a three reasons.

First, the global openness index uses different sources. Second, the global openness index includes trade in goods and services, while merchandise exports include goods but not services. And third, the amount that country A reports exporting to country B does not usually match the amount that B reports importing from A.

We explore this in more detail in our measurement section .

Leonor Freire Costa, Nuno Palma, and Jaime Reis (2015) – The great escape? The contribution of the empire to Portugal's economic growth, 1500–1800 Leonor Freire Costa Nuno Palma Jaime Reis European Review of Economic History, Volume 19, Issue 1, 1 February 2015, Pages 1–22, https://doi.org/10.1093/ereh/heu019

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press.

Integration in the goods markets is measured here through the 'trade openness index', which is defined by the sum of exports and imports as a share of GDP. In our interactive chart you can explore trends in trade openness over this period for a selection of European countries.

Broadberry and O'Rourke (2010) - The Cambridge Economic History of Modern Europe: Volume 2, 1870 to the Present. Cambridge University Press. The graph depicts the “evolution of three indicators measuring integration in commodity, labor, and capital markets over the long run. Commodity market integration is measured by computing the ratio of exports to GDP. Labor market integration is measured by dividing the migratory turnover by population. Financial integration is measured using Feldstein–Horioka estimators of current account disconnectedness.”

We also have the same chart but showing imports .

We also have the same chart, but showing imports .

This interactive chart shows trade in services as a share of GDP across countries and regions.

This chart was inspired by a chart from Helpman, E., Melitz, M., & Rubinstein, Y. (2007). Estimating trade flows: Trading partners and trading volumes (No. w12927). National Bureau of Economic Research.

We also have the same data, but as a stacked-area chart .

There are different ways of capturing this correlation. I focus here on all countries with data over the period 1945-2014. You can find a similar chart using different data sources and time periods in Ventura, J. (2005). A global view of economic growth. Handbook of economic growth, 1, 1419-1497. Online here .

The textbook The Economy: Economics for a Changing World explains this in more detail.

Frankel, J. A., & Romer, D. H. (1999). Does trade cause growth? American Economic Review, 89(3), 379-399.

Alcalá, F., & Ciccone, A. (2004). Trade and productivity . The Quarterly Journal of Economics, 119(2), 613-646.

There are many papers that try to answer this specific question with macro data. For an overview of papers and methods see: Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.

Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvements: Evidence from Chilean plants . The Review of Economic Studies, 69(1), 245-276.

Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87-117. Available online here .

You can read more about these economic concepts, and the related predictions from economic theory, in Chapter 18 of the textbook The Economy: Economics for a Changing World .

David, H., Dorn, D., & Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States . American Economic Review, 103(6), 2121-68.

It's important to mention here that the economist Jonathan Rothwell wrote a paper suggesting these findings are the result of a statistical illusion. Rothwell's critique received some attention from the media , but Autor and coauthors provided a reply , which I think successfully refutes this claim.

Magyari, I. (2017). Firm Reorganization, Chinese Imports, and US Manufacturing Employment . US Census Bureau, Center for Economic Studies.

Topalova, P. (2010). Factor immobility and regional impacts of trade liberalization: Evidence on poverty from India . American Economic Journal: Applied Economics, 2(4), 1-41.

Donaldson, D. (2018). Railroads of the Raj: Estimating the impact of transportation infrastructure . American Economic Review, 108(4-5), 899-934.

Porto, G (2006). Using Survey Data to Assess the Distributional Effects of Trade Policy. Journal of International Economics 70 (2006) 140–160.

Trefler, D. (2004). The long and short of the Canada-US free trade agreement . American Economic Review, 94(4), 870-895.

See: (i) Feenstra, R. C., & Weinstein, D. E. (2017). Globalization, markups, and US welfare . Journal of Political Economy, 125(4), 1040-1074. (ii) Fajgelbaum, P. D., & Khandelwal, A. K. (2016). Measuring the unequal gains from trade . The Quarterly Journal of Economics, 131(3), 1113-1180.

Atkin, David, Benjamin Faber, and Marco Gonzalez-Navarro. "Retail globalization and household welfare: Evidence from Mexico." Journal of Political Economy 126.1 (2018): 1-73.

In the paper, Atkin and coauthors explore the reasons for this and find that the regressive nature of the distribution is mainly due to richer households placing higher weight on the product variety and shopping amenities on offer at these new foreign stores.

Berlingieri, G., Breinlich, H., & Dhingra, S. (2018). The Impact of Trade Agreements on Consumer Welfare—Evidence from the EU Common External Trade Policy. Journal of the European Economic Association.

Nobel laureate Paul Samuelson (1969) was once challenged by the mathematician Stanislaw Ulam: "Name me one proposition in all of the social sciences which is both true and non-trivial." It was several years later than he thought of the correct response: comparative advantage. "That it is logically true need not be argued before a mathematician; that is is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."

(NB. This is an excerpt from https://www.wto.org/english/res_e/reser_e/cadv_e.htm)

Bernhofen, D., & Brown, J. (2004). A Direct Test of the Theory of Comparative Advantage: The Case of Japan. Journal of Political Economy, 112(1), 48-67. doi:1. Retrieved from http://www.jstor.org/stable/10.1086/379944 doi:1

Eaton, J., & Kortum, S. (2002). Technology, geography, and trade. Econometrica, 70(5), 1741-1779.

Crozet, M., & Koenig, P. (2010). Structural Gravity Equations with Intensive and Extensive Margins. The Canadian Journal of Economics / Revue Canadienne D'Economique, 43(1), 41-62. Retrieved from http://www.jstor.org/stable/40389555

Manova, Kalina. "Credit constraints, heterogeneous firms, and international trade." The Review of Economic Studies 80.2 (2013): 711-744.

Melitz, J. (2008). Language and foreign trade. European Economic Review, 52(4), 667-699.

Evenett, S. J., & Keller, W. (2002). On theories explaining the success of the gravity equation . Journal of Political Economy, 110(2), 281-316.

For more information on how the COW trade datasets were constructed see: (i) Barbieri, Katherine, and Omar M. G. Omar Keshk. 2016. Correlates of War Project Trade Data Set Codebook, Version 4.0. Available at http://correlatesofwar.org and (ii) Barbieri, Katherine, Omar M. G. Keshk, and Brian Pollins. 2009. TRADING DATA: Evaluating our Assumptions and Coding Rules. Conflict Management and Peace Science, 26(5): 471–491.

Further information on CEPII's methodology can be found in their working paper .

The chart includes series labeled by the sources as 'merchandise trade' and 'goods trade'. As we explain below, part of the asymmetries in trade data comes from the fact that, although 'merchandise' and 'goods' are equivalent in the dictionary, these two terms often measure related but different things.

For example, if there is no change in ownership (e.g. a firm exports goods to its factory in another country for processing, and then re-imports the processed goods) the manual says that statistical agencies should only record the net difference in value. You can find more details about this in an OECD Statistics Briefing .

This issue is actually also a source of disagreement between National Accounts data and customs data. You can read more about it in this report: Harrison, Anne (2013) FOB/CIF Issue in Merchandise Trade/Transport of Goods in BPM6 and the 2008 SNA, Twenty-Fifth Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C .

Precisely because of the difficulty that arises when trying to establish the origin and final destination of merchandise, some sources distinguish between national and dyadic (i.e. 'directed') trade estimates.

For more details about general and special trade see the Eurostat glossary .

The OECD approach consists of four steps, which they describe as follows: "First, data are collected and organized, and imports are converted to FOB prices to match the valuation of exports. Secondly, data are adjusted for several specific large problems known to drive asymmetries. Presently these include “modular” adjustments for unallocated and confidential trade; for exports by Hong Kong, China; for Swiss non-monetary gold; and for clear-cut cases of product misclassifications. The list of modules is expected to grow over time. In the third step, adjusted data are balanced using a “Symmetry Index” that weights exports and imports. As the final step, the data are also converted to Classification of Products by Activity (CPA) products to better align with National Accounts statistics, such as in national Supply-Use tables." You can read more about it here . In addition to the OECD, other sources also use corrections. The IMF's DOTS dataset, for example, uses a 6 percent rule for converting import valuations (in CIF) into export values (in FOB). More information can be found in the IMF's (2018) working paper on 'New Estimates for Direction of Trade Statistics'.

For more details on this see Forstater, M. (2018) Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different? , CGD Policy Paper 123.

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Globalization and Economic Growth

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• First Online: 14 April 2021
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• Ishak Demir 7 , 10 ,
• Mehmet Canakci 8 &
• Taha Egri 9  

Part of the book series: Encyclopedia of the UN Sustainable Development Goals ((ENUNSDG))

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Economic Growth , Integration and growth , Economic development.

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Globalization, or the increased interconnectedness and interdependence of peoples, companies, institutions and countries. It is generally understood to include two inter-related elements: the opening of international borders to increasingly fast flows of goods, services, finance, investment, people, information, ideas and technology; and the changes in institutions and policies at national and international levels that facilitate or promote such flows (WHO 2020 ). Globalization process has impacts on economies, prosperity, development of societies, political systems, environment, and cultures around the world.

Economic globalization can be defined as the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. It reflects the continuing expansion and mutual...

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Demir, I., Canakci, M., Egri, T. (2021). Globalization and Economic Growth. In: Leal Filho, W., Azul, A.M., Brandli, L., Lange Salvia, A., Wall, T. (eds) Decent Work and Economic Growth. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71058-7_90-1

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The State of Globalization in 2023

• Steven A. Altman
• Caroline R. Bastian

Data disproves the notion that the world has become more regionalized in recent years.

Plummeting flows of trade, capital, and people at the beginning of the Covid-19 pandemic prompted a wave of speculation about the end of globalization, and Russia’s invasion of Ukraine brought even more predictions of a retreat toward national self-sufficiency. But, according to research for the latest DHL Global Connectedness Index, international flows show no signs of a sustained downturn. The data shows a broad pattern of decoupling between the U.S. and China, but the flows of countries that are geopolitically aligned with the U.S. and China do not — at least yet — indicate a broader split between rival blocs. Nor is there evidence that globalization is giving way to regionalization. While companies do need to adjust for heightened geopolitical tensions, they should not abandon global strategies. Corporate deglobalization, in fact, could be a riskier path than making focused adjustments to mitigate geopolitical risks.

Three key questions lie at the heart of debates about whether global crises and escalating geopolitical tensions have begun to reverse globalization: Has the growth of cross-border trade, capital, information and people flows gone into reverse? Are geopolitical tensions fracturing the world economy into rival blocs? And is globalization giving way to regionalization? The answer to all three questions — despite evidence of U.S.-China decoupling — is still “no.”

• Steven A. Altman is a senior research scholar, adjunct assistant professor, and director of the DHL Initiative on Globalization at the NYU Stern Center for the Future of Management .
• CB Caroline R. Bastian is a research scholar at the DHL Initiative on Globalization.

Partner Center

How our interconnected world is changing

Globalization isn’t going away, but it is changing, according to recent research  from the McKinsey Global Institute (MGI). In this episode of The McKinsey Podcast , MGI director Olivia White speaks with global editorial director Lucia Rahilly about the flows of goods, knowledge, and labor that drive global integration—and about what reshaping these flows might mean for our interconnected future.

After, global brewer AB InBev has flourished in the throes of what its CFO Fernando Tennenbaum describes as the recent “twists and turns.” Find out how in this excerpt from “ How to thrive in a downturn: A CFO perspective ,” recorded in December 2022 as part of our McKinsey Live series. 1 Please note that market conditions may have changed since this interview was conducted in December 2022.

The McKinsey Podcast is cohosted by Roberta Fusaro and Lucia Rahilly.

This transcript has been edited for clarity and length.

Globalization is here to stay

Lucia Rahilly: Pundits and other public figures have wrongly predicted the demise of globalization for what seems like years. Now, given the war in Ukraine and other disruptions, many are once again sounding its death knell. What does this new MGI research  tell us about the fate of globalization? Is it really in retreat?

Olivia White: The flows of goods, the real tangible stuff, have leveled off after nearly 20-plus years of growing at twice the rate of GDP. But the flows of goods kept pace with GDP and even rose a little bit, surprisingly, in the past couple of years. Since GDP has been growing, that means actual ties have gotten stronger.

One of the most striking findings from this research was that flows representing knowledge and know-how, such as IP and data, and flows of services and international students have accelerated and are now growing faster than the flow of goods. Flows of data grew by more than 40 percent per annum over the past ten years.

Lucia Rahilly: Goods are a smaller share of total flows, a smaller share of economic output, than in the past. That doesn’t necessarily sound like a bad thing. Could it be a sign of progress?

Olivia White: The fact that certain goods are growing less quickly than other types of flows shows this shift in our economy and what’s most important to the way the economy functions. It comes on the back of a long history of different factors that influence growth and shifts in the way patterns work. What’s happening, in part, is that a variety of countries are producing more domestically—first and foremost China. That has been driving a lot of the flow down, if you take the longitudinal view, over the past ten years versus before.

The world remains interdependent

Lucia Rahilly: How interdependent would you say we are at this stage? Could you give us some examples of the ways we’re interconnected?

Olivia White: The top line is, every region in the world depends on another significant region for at least 25 percent of a flow it values most.

In general, regions that are manufacturing regions—Europe, Asia–Pacific, and China, if we look at it on its own because it’s such a large economy—depend very strongly on the rest of the world for resources: food to some degree, but really energy and minerals of different sorts. I’ll give you a few examples.

In general, regions that are manufacturing regions depend very strongly on the rest of the world for resources: food to some degree, but really energy and minerals. Olivia White

China imports over 25 percent of its minerals, from places as far-flung as Brazil, Chile, and South Africa. China imports energy, particularly in the form of oil from the Middle East and Russia. Europe is emblematic of these forms of dependency on energy. It was dependent on Russia for over 50 percent of its energy, but now that has drastically changed.

In some other regions in the world—places that are resource rich, like the Middle East, sub-Saharan Africa, and Latin America—those places are highly dependent on the rest of the world for their manufactured goods. Well over half the world’s population lives in those places. They import well over 50 percent of their electronics and similar amounts of their pharmaceuticals. They are highly dependent on other parts of the world for things that are really quite critical to development and for modern life.

North America is somewhat of a different story. We don’t have any single spot of quite as great a dependency, at least at the broad category level. We import close to 25 percent of what we use in net value terms across the spectrum, both of resources and of manufactured goods.

This doesn’t yet speak of data and IP, where, for example, the US and Europe are fairly significant producers/exporters. A country like China is a very large consumer of IP.

Lucia Rahilly: How interdependent are we in terms of the global workforce?

Olivia White: This is quite striking. We asked how many workers in regions outside North America serve North American demand. And we asked the same question for Europe. It turns out that 60 million people in regions outside North America serve North American demand, and in Europe the corresponding number is 50 million.

These numbers are very substantial versus the working populations in those countries. So when you consider how much of what North Americans or Europeans are consuming could be produced onshore, by onshore labor, the answer is not even remotely close to those sorts of numbers—at least given the means of production or the way services are delivered today and the role people play in that.

Lucia Rahilly: Let’s turn to some of the categories of flows that have increased in recent years. What’s driving growth in global flows now that the trade in goods has stabilized?

Olivia White: Flows linked to knowledge and know-how. Knowledge services that have historically grown more slowly than manufactured goods and resources, with increased global connection over time, have flipped over the past ten years.

Professional services, such as engineering services, are among those more traditional trade flows that have been growing fastest, at about 6 percent a year, versus resources, which have slowed to just around two percent. Anything that involves real know-how—engineering, but also providing, say, call center support—is in that category.

The flows of IP are growing even faster. Now, IP is tricky because accounting for it is a very tricky thing to do. But it roughly looks at flows of the fun stuff. In the report we talk about Squid Game , but IP also includes movies, streaming platforms, music, and any sort of cultural elements that we consume.

It’s also important to consider flows of patents and ideas and the way countries or companies will use ideas or know-how developed in one country to help what they do broadly across the world. Those flows have been growing at roughly 6 percent per year as well.

There are data flows—the flows of packets of data. For example, if we were in different countries while conducting this interview there would be the flows between us. There are also flows linked to our ever-expanding use of cloud and data localization. Data transfer is happening more and more quickly.

The flows of international students have also been rising. That was mightily interrupted by the pandemic, for reasons I don’t need to belabor, but these flows seem to be rebounding. It’s important to consider the degree to which those will jump back on their accelerated growth trajectory.

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How covid-19 has affected global flows.

Lucia Rahilly: You mentioned flows of international students dropping off during COVID, for the obvious reasons. Did other flows generally drop off during the pandemic? Or were there examples of flows that were particularly resilient throughout that period?

Olivia White: There’s some variation, but many flows were remarkably resilient—resilient in a way that’s a bit counter to the general narrative about what happened during the pandemic.

The flows of resources and manufactured goods jumped reasonably significantly in 2020 and 2021, both to levels of about 6 percent per year on an annualized basis. To some degree, what was happening is that cross-border flows stepped in to replace interrupted domestic production. Flows from Asia came in, for example, to the US or to Europe. We’ve seen some flows go in reverse directions. There was a bunch of interruption in domestic production, which was quite surprising.

Flows of capital also jumped quite a lot as people needed to shift the way they were financing themselves. Multinationals needed to shift the way they were financing themselves. Some were moving liquidity to different parts of the world under times of financial stress. But those jumped to levels of growth in the tens of digits from what had actually been reversed growth for the past ten years. All those things jumped. IP jumped a little bit; data remained high. So these flows have been remarkably resilient.

The good and bad news about resource concentration

Lucia Rahilly: You invoked concentration a bit when you talked about Europe being dependent on Russia for 50 percent of its energy. Can you say a bit more about what concentration means in this context and how it affects the dynamics of the way we’re connected globally?

Olivia White: From the global perspective, there are some products that truly originate in only a few places in the world, and all of us across the globe are dependent on those few places for our supply. Iron ore is quite concentrated, and cobalt is concentrated in the DRC [Democratic Republic of the Congo].

The second type of concentration is viewed from the standpoint of an individual country. Lucia, you talked about Europe and gas dependency.

For example, Germany was getting gas from only a very concentrated set of sources. These are places where, for a variety of reasons, countries have built up dependencies on just a small number of other countries.

Why has this happened? Why are we in this position? Cost is one reason. People have made decisions based on economic factors. Another reason is regional preference. Not all goods are created equal, even if they fall in the same category.

The third reason is preferential trade agreements between different countries or other forms of tariffs or taxes that shape the way flows occur. We’re in a world in which suddenly people are realizing they have to contemplate the consequences associated with concentration—not of suppliers, but of the country of origin from which they’re buying things.

Lucia Rahilly: It sounds like concentration also increases efficiency in some cases where those disruptions don’t occur. Is concentration always a bad thing? If we rethink concentration, can we expect to see some loss of efficiency in the interim?

Olivia White: No, it’s not always a bad thing. But there are a lot of considerations to make that involve costs, involve geopolitical relationships, involve the role that various countries want to play themselves, how they’re thinking about development, how they’re thinking about their workforces. All those things have to be part of the mix.

Imagine three or four different countries, each with three trading partners, and they’re largely different trading partners. Swapping off who’s supplied by whom is a huge problem of coordination.

How global chains will evolve

Lucia Rahilly: Geopolitical risks  have obviously trained a policy spotlight on reimagining these global value chains, whether for security reasons or to strengthen resilience more generally. Accepting that the world remains interdependent, how do we see trade flows continuing to evolve in coming years?

Olivia White: Broadly speaking, there are four categories of potential evolution. Semiconductors are most prominent in public discussion. Electronics, more broadly, is one of the fastest-moving value chains since 1995, with 21 percentage points of share movement per decade. Pharmaceuticals and the mining of critical minerals are other examples. And they will be part of what shifts the way that flows crisscross the globe.

Second category: textiles and apparel. This category is not as sensitive in a geopolitical sense as some of the things I was talking about before. This category is one where you actually do have new hub creation right now. Consumer electronics, other forms of electric equipment that aren’t particularly sensitive, possibly fall in that category too.

Third category: IT services and financial intermediation or professional services. That will reconfigure the ways in which services flow.

Fourth and finally, there’s the stuff that’s just going to be steady—food and beverages, paper and printing. There’s no particular reason to expect that there are strong forcing mechanisms that will change the way those things are flowing across the world right now. They’re things that have remained relatively steady for the past ten or more years.

Global flows are necessary for a net-zero transition

Lucia Rahilly: Do we have a view on whether the evolving state of global flows is helping or hindering the net-zero transition ?

Olivia White: The way I’d put it is, there is no way we move quickly toward a net-zero transition without global flows. There are certainly things about global flows that are tricky from a net-zero perspective. It costs carbon to ship things and move things a long way. But in order for net zero to be attainable, we need to make sure that energy-generating technologies and fuels are able to flow across the world.

Energy-generating technologies include both the minerals that underpin construction of those technologies and the actual manufacturing. So, in the first category, think nickel and lithium. In the second category, think about the actual manufacturing of solar panels. The minerals themselves are processed in only a few countries around the world. So people are going to have to move them from one place to another. Maybe the world could have broader diversification of such things, but on average, the timeline from discovering a mineral to being able to produce it at scale is well in excess of 16 years. If we want to move fast, we have the luxury to move things across the world. Meeting cost curves for manufacturing at scale and in locations where you have at least some established presence is going to be important.

The final element that’s crucial with respect to net zero is cross-border capital flows. It’s really important that developing countries are able to finance shifts in the way that energy is produced and consumed in their countries, which means they may have to both spend more, at least as a ratio of GDP, and have less ability to spend, given other forms of development imperative.

Multinationals and global resilience

Lucia Rahilly: What’s the role of major multinational companies as we look ahead toward reimagining the future of our global connectedness?

Olivia White: The first thing that needs to be recognized is that major multinational corporations play an outsize role in global flows today. Multinationals are responsible for about 30 percent of trade. They’re responsible for 60 percent of exports and 82 percent of exports of knowledge-intensive goods. So they disproportionately drive flows, especially the ones associated with knowledge. And therefore, they’re going to be the center of managing for their own resilience, but also in a collective sense, for the resilience of the world.

The future of global flows

Lucia Rahilly: The media tends to focus on what some see as globalization’s imminent demise. Accepting that global ties continue to bind and connect us across the world, it’s also natural for folks to have pretty strong reactions to these intense and ongoing global disruptions that we’ve experienced in recent years. How would you sum up the way we think about the future of globalization at a high level?

Olivia White: The world we live in right now is highly dependent on flows. Will those flows reconfigure and shift? Yes, absolutely. They have in the past, and they will in the future.

Lucia Rahilly: Do we see anything in the research to indicate that the world is actually moving toward decoupling, which is also very much part of the media narrative?

Olivia White: If you look along regional lines, individual regions can’t be independent. If you just start to play with what sorts of decoupling of regions would be possible, you see very quickly that it’s not something you can do.

Now, is it possible that you would get groups of countries that become more strongly interconnected among themselves and less strongly connected with others? Absolutely. It’s possible to move in that direction. The question becomes, is there an actual decoupling, or do you just have a shift in degree? As with most things in the world, the answer tends toward the shift in degree rather than an abrupt or sharp true change or decoupling.

Lucia Rahilly: Does greater regionalization improve resilience?

Olivia White: To some degree you can say, “Look, if I’m self-sufficient, I’m more resilient.” On the other hand, all of a sudden you depend on yourself for everything, and that’s a point of vulnerability in the same way that getting it only from one other person would be a problem.

There are a whole host of reasons some degree of regionalization might help. You’ve got things closer to you. But dependency just on a few sets of people, whether or not they’re in your region, means you’ve got dependency on just a few points of potential weaknesses rather than a broad web, which in general is a more resilient and robust structure.

Lucia Rahilly: Thanks so much, Olivia. That was such an interesting discussion.

Olivia White: A real pleasure, Lucia. Thank you.

Roberta Fusaro: One example of resilience is AB InBev. Here to talk about how it’s prospering in the face of worldwide disruption is its CFO, Fernando Tennenbaum. This excerpt, “ How to thrive in a downturn: A CFO perspective ,” from our McKinsey Live series, was recorded in December 2022.

Lucia Rahilly: Fernando, we’re confronting an unusual constellation of disruptions: inflation, high interest rates driving up the cost of capital, geopolitical turbulence unexpectedly upending supply chains and sending energy prices spiking—it’s genuinely a volatile moment. Tell us, how is AB InBev faring in the current context?

Fernando Tennenbaum: We’re fortunate to be in a resilient category. Despite these twists and turns in different parts of the world, beer sales have been quite strong. That said, inflation has turned out to be much higher than expected. 2 Market conditions may have changed since this interview was conducted. We need to ensure our operations are in sync with the market, to meet this unique moment. We need to understand the state of the consumer and adjust our operations accordingly.

In emerging markets like Latin America and Africa, inflation is not new news. There are different levels of inflation, but inflation has been a part of these economies for a very long time. Consumers are more used to it, companies are more used to it—and it’s probably a more straightforward discussion.

Lucia Rahilly: You’ve spent much of your career in Latin America where, as you said, inflation has historically been much higher and more volatile than in the US or in Western Europe. Walk us through some of the lessons that we in the US, for example, could learn from.

Fernando Tennenbaum: Make sure that you’re always looking at your customers, and that you’re always keeping up with inflation. You should avoid lagging too much, and you should avoid overpricing compared with inflation. If you do too little or too much, you start disturbing the health of the consumer. If you get it right, it’s probably a good thing for the business. You have to make sure you navigate the rising cost environment while ensuring that the consumer is in a good place, your product is in a good place, and the category is a healthy one. It’s a balancing act.

You should avoid lagging too much, and you should avoid overpricing compared with inflation. If you do too little or too much, you start disturbing the health of the consumer. Fernando Tennenbaum

Lucia Rahilly: AB InBev has a diverse portfolio of brands. Volumes are good. Are customers trading up or down, during this period, between your premium and mass-market brands?

Fernando Tennenbaum: Premiumization continues to be a trend, and consumers continue to trade up to premium brands. Over the course of this year, people often asked whether consumers were trading down—and we see no evidence of trading down. That is true for the US, that is true for Africa, and that is true for Latin America—which is quite unique.

I don’t know if the future will be different; the world is changing so fast. But if you were to ask me ten years from now, I’d expect premium to be even bigger than it is today.

Lucia Rahilly: Let’s talk about uncertainty. The economy could play out in many different ways. How do you manage for that?

Fernando Tennenbaum: Let’s take our debt portfolio. Now is the moment that interest rates are going up. Inflation and borrowing are going up. Overall, this tends to be bad news—but for us, it’s quite the opposite because we don’t have any debt maturing in the next three years. We prepared for this when we saw the world going to a very different place at the beginning of 2020.

We ended up raising some long-term debt and repaying all our short-term debt. Now we’re left with a debt portfolio that has an average maturity of 16 years and no meaningful amount of debt maturing in the next three years—all at a fixed rate. Since we don’t need to refinance, we’re actually buying back our debt. Rising interest rates can be good when you can buy back debt cheaper than it cost to issue.

Lucia Rahilly: You became CFO at AB InBev in 2020, when pandemic uncertainty was at its peak. Talk to us about how you navigated that period.

Fernando Tennenbaum: The first thing we did in 2020 was pump up our cash position. Not that we needed it, but I felt it would give operations peace of mind. To be prepared, we started borrowing a lot of money. And we started taking care of our people. We needed to make sure our people were safe—that was priority number one.

Once we made sure our employees were safe, our operations were safe, then we looked at opportunities and started to fast-forward. I remember we looked at May, for example, and started to see a lot of markets doing well in terms of volume. We had a lot of cash. We started buying back some debt, especially near-term debt, to create even more optionality for the future.

We also accelerated our digital transformation. The moment was uniquely suited for it. Digital was a much better way to reach customers at a time when everybody was afraid to meet in person. In hindsight, the company ended up in a much better place today than it was three years ago—in terms of our portfolio, our digital transformation, and even financially—because we acted very quickly and created a lot of optionality during the first few months of the pandemic.

Lucia Rahilly: Any mistakes to avoid?

Fernando Tennenbaum: Looking back, I wouldn’t have done anything massively different. If I had known the outcome, I might have done things differently. But without knowing the outcome, I felt that the way we managed and the optionality we created set us up well.

Lucia Rahilly: Brewing is such an agriculturally dependent business, and agriculture has been significantly disrupted, both because of the war in Ukraine and because of climate-related risk. As CFO, how do you think about sustainability in terms of longer-term value creation?

Fernando Tennenbaum: Sustainability cuts across the whole of our business. We have a lot of local suppliers—20,000 local farmers. Our brewing processes are natural. The more efficient we are there, the more sustainable we are and, actually, the more profitable we are. We have local operations, and we sell to the local community. And most of our customers are very small entrepreneurs. The more we help them, the better they can run their business. And we say beer is inclusive because we have two billion consumers.

Lucia Rahilly: Is packaging also part of the sustainability approach?

Fernando Tennenbaum: Definitely. For example, we have returnable glass bottles. That’s very efficient, very sustainable, and from an economic standpoint, that’s probably the most profitable packaging we have. It’s also the most affordable for consumers. So it’s good for us, good for the environment, and good for the consumers.

Lucia Rahilly: You said beer is inclusive in part because so many of us drink it. How else do you approach inclusion at AB InBev?

Fernando Tennenbaum: Our two billion consumers are very different from one another. We need to make sure that, as a company, we reflect our consumers. Whenever we look at our colleagues, we need to make sure they reflect the societies where we operate—and we operate in very different societies.

A diverse and inclusive team is going to be a better team. That also applies to our suppliers. For example, if you think about suppliers in Africa, some are very poor. They manage to get access to technology, which means we can track whether they’re receiving the funds we pay them. We can track where agricultural commodities are being sourced. So how we financially empower them is also a very important part of our sustainability strategy.

Lucia Rahilly: Looking ahead, how are you thinking about innovation and investment in technology, in order to enable growth?

Fernando Tennenbaum: Innovation is a key component of beer, and there are two sides to that. One is innovation in products. The other is packaging. In Mexico, for example, we have different pack sizes for different consumption occasions and consumer needs.

Beyond that, there’s also technological innovation. Take our B2B platform, which we started piloting in 2019. Now, three or four years later, we have around $30 billion of GMV [gross merchandise value] in our e-commerce platform, which is accessible in more than 19 countries. That’s the optimal portfolio to improve customer engagement at their point of sale. Before we launched our B2B platform, we used to spend seven minutes per week interacting with our customers. Today, with our B2B platform, we interact with them 30 minutes per week. We increased the number of points of sales. For example, in Brazil, we used to have 700,000 customers, and now we have more than a million customers. Previously, they were buying our products from a distributor. Now we can reach them directly with the B2B system in place.

This connection with our customers means we can do a lot of other things, like our online marketplace, where third-party products generated an annualized GMV of $850 million, up from zero four years ago. That marketplace now continues to grow and to deliver a lot of value for our customers and for ourselves.

Lucia Rahilly: One more question: If you could give one piece of advice to a brand-new CFO of a large, multinational corporation, what would it be in this market?

Fernando Tennenbaum: Make sure you plan for different scenarios. The world is moving very fast, and you can’t expect it to unfold in a certain way. But if you have options, are agile in making decisions, and have a very engaged team, then regardless of the twists and turns, you are able to meet the moment. And you are definitely able to deliver on your objectives.

Lucia Rahilly: I lied. I’m going to ask you one more. How do you see, for these new CFOs, the relationship between sustainability and inclusivity and growth? Do you see those in tension?

Fernando Tennenbaum: There is this myth that you are either sustainable or profitable. At least at AB InBev, we’re sure they go hand in hand. The more sustainable you are, the more profitable you are, and the more value you create for your different stakeholders.

Fernando Tennenbaum is the CFO of Anheuser-Busch InBev. Olivia White is a director of the McKinsey Global Institute and a senior partner in McKinsey’s Bay Area office. Roberta Fusaro is an editorial director in the Waltham, Massachusetts, office, and Lucia Rahilly is global editorial director and deputy publisher of McKinsey Global Publishing and is based in the New York office.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

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October 5, 2016

In 2006, the Brookings Institution determined that a standalone research program was needed to have the depth and breadth to explore the most pressing issues facing an increasingly globalized world. Ten years later, as Brookings celebrates its centenary , the Global Economy and Development program has become a source of innovative thinking on how to improve global economic cooperation and fight global poverty and sources of social stress.

In celebration of this anniversary, these 11 essays below reflect the Global Economy and Development program’s most recent work and delve into the critical issues facing all those concerned about globalization.

Are technology and globalization destined to drive up inequality?

Authors: Kemal Derviş , Laurence Chandy

Over the past several years, concerns that technology and globalization lead to ever greater inequality have reached fever pitch in the U.S. and beyond. To understand what’s behind this anxiety, three distinctions are useful.

Continue reading

Skills in the digital age—how should education systems evolve?

Authors: Rebecca Winthrop , Timothy P. Williams , Eileen McGivney

At no point in history have more children been enrolled in formal education. Thanks to global commitments and movements such as the Millennium Development Goals and Education For All, more than 90 percent of all primary-age children are now in school.

Sub-Saharan Africa: Land of promise or of peril?

Authors: Amadou Sy

After more than a decade of relatively strong economic progress, sub-Saharan Africa’s aggregate GDP growth is slowing as external shocks threaten recent advances. According to the International Monetary Fund’s April 2016 Regional Economic Outlook for sub-Saharan Africa, between 2000 and 2015, the continent grew at an average rate of 5.5 percent.

Where are Latin American economies headed?

Authors: Ernesto Talvi

For the better part of the past decade, close to 80 percent of countries in Latin America were ruled by center-left and populist governments. However, this hegemony seems to be coming to an end, with center-right parties recently rising to power in Argentina, Brazil, Guatemala, Paraguay, and Peru. Should this come as a surprise? The short answer is no.

Can globalization be rescued from itself?

Authors: Homi Kharas , John W. McArthur

Globalization—the integration among national economies of markets for goods, services, technology, capital flows, and, to some degree, labor—has played an enormous role in advancing global prosperity. Yet a backlash has emerged, manifested in the recent U.K. Brexit vote, strident “local first” demands, and calls to block trade agreements. The issues are not entirely new.

Are certain countries doomed to remain emerging?

Authors: John Page

Incomes in developed and developing countries have been converging, especially since the turn of the century, but the unevenness of that trajectory merits further examination. Beginning in the early the 2000s, the average per capita income of developing countries (adjusted for purchasing power parity) has increased substantially relative to the average per capita income of developed countries.

GDP growth—is it “good-enough”? Or does it distort policy-making?

Authors: Carol Graham

Today, standard benchmarks of progress, productivity, job quality, and democracy are being upended. Income-based measures such as gross domestic product (GDP) served us well for decades, yet when GDP counts pollutant-generating economic activity on the positive side of the balance sheet, or when it fails to measure unpaid labor activity, it falls short. This is especially worrying given that we live in a world wracked by social inequities.

The U.S. and international trade: Why did things go sour?

Authors: Joshua P. Meltzer

Since 1945, the United States has led international efforts to expand trade and integrate markets, helping underpin U.S. as well as global growth. Yet 2016 Republican presidential nominee Donald Trump is proposing policies that would turn the U.S. away from greater economic integration and likely provoke a trade war. Democratic nominee Hillary Clinton has backed away from supporting the Trans-Pacific Partnership (TPP) Agreement—a 12 nation trade deal signed by President Obama in February 2016.

Can the ambitions of the Paris Climate Agreement be met?

Authors: Amar Bhattacharya

The Paris Agreement on climate change overcame the notion of a “horse race” between development and climate responsibility. At its core is a promise to keep global warming to “well below 2 degrees Celsius” and to “pursue efforts for 1.5 Celsius or lower.” The agreement forms the basis of new international, cooperative, long-term climate change action plans with a shared sense of direction and responsibility.

Cities—Is better access key to sustainability?

Authors: Jeffrey Gutman , Nirav Patel

Nine years ago the global urban population surpassed the world’s rural population, making it clear that the fate of cities will determine our future prosperity. As enshrined in the United Nations’ Sustainable Development Goals, for cities to thrive, action is needed to ensure that urban areas and human settlements are “inclusive, safe, resilient, and sustainable.” With the October 2016 U.N. Conference on Sustainable Housing and Urban Development (Habitat III) in Quito, Ecuador set to agree on a new global urbanization agenda for the next two decades, the time to advocate for inclusive, accessible cities is now.

The international monetary system—Is it fit for purpose?

Authors: Eswar Prasad

The key question concerning the international monetary system is whether it can function in a manner that promotes global economic and financial stability rather than become a source of instability in itself or a channel through which such instability becomes more pervasive.

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Market Competition, Earnings Management, and Persistence in Accounting Profitability Around the World

We examine how cross-country differences in product, capital, and labor market competition, and earnings management affect mean reversion in accounting return on assets. Using a sample of 48,465 unique firms from 49 countries, we find that accounting returns mean revert faster in countries where there is more product and capital market competition, as predicted by economic theory. Country differences in labor market competition and earnings management are also related to mean reversion in accounting returns—but the relation varies with firm performance. Country labor competition increases mean reversion when unexpected returns are positive, but dampens it when unexpected returns are negative. Accounting returns in countries with higher earnings management mean revert more slowly for profitable firms and more rapidly for loss firms. Thus, earnings management incentives to slow or speed up mean reversion in accounting returns are accentuated in countries where there is a high propensity for earnings management. Overall, these findings suggest that country factors explain mean reversion in accounting returns and are therefore relevant for firm valuation.

We examine how cross-country differences in product, capital, and labor market competition, and earnings management affect mean reversion in accounting return on assets. Using a sample of 48,465 unique firms from 49 countries, we find that accounting returns mean revert faster in countries where there is more product and capital market...

Spanning the Institutional Abyss: The Intergovernmental Network and the Governance of Foreign Direct Investment

Global economic transactions such as foreign direct investment must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs), whose members are states, represent an important attempt to span this abyss. IGOs are mandated variously to smooth economic transactions, facilitate global cooperation, and promote cultural contact and awareness. We use a network approach to demonstrate that the connections between two countries through joint-membership in the same IGOs are associated with a large positive influence on the foreign direct investment that flows between them. Moreover, we show that this effect occurs not only in the case of IGOs that focus on economic issues, but also on those with social and cultural mandates. This demonstrates that relational governance is important and feasible in the global context and for the most risky transactions. Finally we examine the interdependence between the IGO network and the domestic institutions of states. The interdependence between these global and domestic institutional forms is complex, with target-country democracy being a substitute for economic IGOs, but a complement for social and cultural IGOs.

Global economic transactions such as foreign direct investment must extend over an institutional abyss between the jurisdiction, and therefore protection, of the states involved. Intergovernmental organizations (IGOs), whose members are states, represent an important attempt to span this abyss. IGOs are mandated variously to smooth economic...

Ethnic Innovation and U.S. Multinational Firm Activity

This paper studies the impact that immigrant innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity are associated with increases in the share of that firm's affiliate activity in their native countries. Ethnic innovators also appear to facilitate the disintegration of innovative activity across borders and to allow U.S. multinationals to form new affiliates abroad without the support of local joint venture partners. Thus, this paper points out that immigration can enhance the competitiveness of multinational firms.

This paper studies the impact that immigrant innovators have on the global activities of U.S. firms by analyzing detailed data on patent applications and on the operations of the foreign affiliates of U.S. multinational firms. The results indicate that increases in the share of a firm's innovation performed by inventors of a particular ethnicity...

Multinational Enterprises and Incomplete Institutions: The Demandingness of Minimum Moral Standards

Multinational enterprises (MNEs) operate across countries that vary widely in their legal, political, and regulatory institutions. One question that arises is whether there are certain minimum standards that ought to guide managers in their decision making independently of local institutional requirements, especially when institutional arrangements are incomplete. This chapter examines what follows if managers recognize two kinds of duties of forbearance in their decision making that are commonly held to be among the most minimal of moral duties: the duty not to harm and the duty not to violate the liberty of others. The chapter concludes that the standards for MNEs may be more demanding than what the minimalist nature of duties of forbearance initially would suggest.

Multinational enterprises (MNEs) operate across countries that vary widely in their legal, political, and regulatory institutions. One question that arises is whether there are certain minimum standards that ought to guide managers in their decision making independently of local institutional requirements, especially when institutional...

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Finance and Social Responsibility in the Informal Economy: Institutional Voids, Globalization and Microfinance Institutions

We examine the heterogeneous effects of globalization on the interest rate setting by microfinance institutions (MFIs) around the world. We consider MFIs as a mechanism to overcome the institutional void of credit for small entrepreneurs in developing and emerging economies. Using a large global panel of MFIs from 119 countries, we find that social globalization that embraces egalitarian institutions on average reduces MFIs' interest rates. In contrast, economic globalization that embraces neoliberal institutions on average increases MFIs' interest rates. Moreover, the proportions of female borrowers and of poorer borrowers negatively moderate the relationship between social globalization and MFI interest rate, and positively moderate the relationship between economic globalization and MFI interest rate. This paper contributes to understanding how globalization processes can both ameliorate and exacerbate challenges of institutional voids in emerging and developing economies.

We examine the heterogeneous effects of globalization on the interest rate setting by microfinance institutions (MFIs) around the world. We consider MFIs as a mechanism to overcome the institutional void of credit for small entrepreneurs in developing and emerging economies. Using a large global panel of MFIs from 119 countries, we find that...

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Chapter: 8 how is economic globalization affecting inequality, 8 how is economic globalization affecting inequality.

W e live in an unequal world in which descriptors of global inequality—especially inequalities in income—abound. “[T]he world’s richest 500 individuals have a combined income greater than that of the poorest 416 million … 2.5 billion people [are] living on less than $2 a day” (Watkins et al., 2005: 18). Researchers and policy makers continue to debate how, and at what scale, inequality trends are changing, but, by any measure, the disparities between rich and poor are striking (Firebaugh, 2003; Milanovic, 2005; The Economist , 2006; Held and Kaya, 2007; Lobao et al., 2007). The recent past has also seen rapid economic globalization—characterized by the supranational spatial integration of economies and societies (Stiglitz, 2002). Globalization has intensified flows of goods, finance, people, and political/cultural interactions all across our planet (Mittelman, 2002; Dicken, 2007). Understanding the nature of, and linkages between, globalization and inequality is crucial because disparities abound in access to needs such as shelter, land, food and clean water, sustainable livelihoods, technology, and information. Inequalities in all of these realms pose challenges to human security and environmental sustainability.

Much of the research on the link between globalization and inequality has focused on the global scale—looking at inequality between countries using aggregate economic indicators such as gross domestic product per capita (sometimes weighted by national population). These measures of global inequality are limited because they implicitly assume that within-country distributions of income are perfectly equal (Milanovic, 2005). Comparisons of inequality across individuals in the global population, and across a broader range of measures, regardless of national boundaries, are much rarer, but are increasingly possible and necessary (Milanovic, 2005). Beyond the need for improved measures of global inequality, we are currently witnessing a historic change in patterns of inequality, termed by Firebaugh (2003) as the “inequality transition.” Since the 1980s, evidence suggests that inequalities have increased more rapidly within countries than between them, heralding the reversal of increasing between-country inequality—a trend that began with the Industrial Revolution (Milanovic, 2005; Held and Kaya, 2007).

Because it may seem counterintuitive that subnational inequality would grow in an era of globalization, this finding points to the importance of research on scale differences in inequality patterns, and on the spatial impacts of specific aspects of economic globalization, so that we can better understand how globalizing processes influence inequality—where and for whom (Kanbur and Venables, 2007). Addressing this problem requires research aimed at identifying how distributional mechanisms within markets and governance arrangements are shaping inequality across geographical scales and differentially distributed populations (see Lobao et al., 2007).

The timing of the recent shift in inequality patterns (the early 1980s) corresponds with the rise of new forms of economic globalization that have transformed spatial relationships around the globe. Expanding transportation and communication networks, trade liberalization, reorganization of financial structures, and the rise of new

regional trade agreements have been redefining flows of commodities, investments, labor, and political power across the globe (Murray, 2006; Dicken, 2007). In the process, the “where and who” of the winners and losers of globalization are changing, as is the traditional role of the state in economic governance. The state is no longer the only, or even the primary, actor in economic processes, because markets are now global, regional, and local as much as they are national (O’Loughlin et al., 2004). A key research challenge going forward, then, is to move beyond a focus on individual states and identify the relationships between globalization and shifting patterns of inequality at varying scales (Held and Kaya, 2007).

ROLE OF THE GEOGRAPHICAL SCIENCES

Research in the geographical sciences can help identify the patterns and processes producing inequality across the world—within states and at local levels. Although sociology takes inequality to be a central problem, Lobao et al. (2007) argue that too much sociological research on inequality still operates at the national scale and entails questionable geographical assumptions about both the causes and patterns of inequality. These scholars argue for “the systematic incorporation of spatial factors into theory and research on inequalities” (Tickameyer, 2000: 811) and for research that builds multiscale models and draws on spatially referenced data. Geographical scientists are at the forefront of this research, undertaking projects aimed at representing and analyzing the intersections between the spatial and social dimensions of inequality. For example, geographical research is providing innovative cartographic representations of inequality that shed light on the nature and significance of patterns of inequality ( Figure 8.1 ).

Research in what has been termed the “new economic geography” is currently analyzing the spatial character of inequality by building structural models of the relations between economies of scale, transport costs, geographical remoteness from markets, and biophysical resource endowments (Krugman, 1993; Redding and Venables, 2004). The 2009 World Development Report adopts this frame of analysis to argue that three geographical dimensions of the global economy must be transformed to reduce inequality. The report argues that these reductions will result from (1) a greater concentration of economic activity (density), (2) a reduction in the friction of distance (i.e., increasing the mobility of goods, capital, and labor), and (3) diminished divisions between places as a result of borders and differences in language and regulations (World Bank, 2009: 7). Research in the geographical sciences extends the new economic geography (see Part I , Box 1 ), positing the fundamental importance of place-based influences on economic developments. It follows that policy makers need to focus more attention on local contextual influences, a point highlighted by Kates and Dasgupta (2007: 16749). Along the same lines, Sachs (2006: 73) notes that “policy makers and analysts should be sensitive to geographical, political and cultural conditions that may each play a role (in producing poverty).”

In their efforts to understand uneven development within and across places, geographical scientists have developed a body of work focused on the spatially variable operation of processes producing inequality in places characterized by different systems of macroeconomic regulation, different welfare regimes, different social divisions of labor (between paid and unpaid work, for example), and different consumption and distribution practices (Jones and Kodras, 1990; Smith, 1990; Kodras and Jones, 1991; Perrons, 2001). Research in this vein, which has been undertaken by geographically oriented researchers in demography, geography, economics, and political science, has shown that inequality emerges from multiple processes operating simultaneously at a range of spatial scales, including unequal global distributions of returns to production and work at sites along international production and consumption chains; regional trade agreements that limit national sovereignty on environmental and labor protections; and the presence of race and gender discrimination in different places (Nagar et al., 2002). Their findings are of relevance to debates about the economic and inequality impacts of market liberalization (see generally Firebaugh, 2003; Milanovic, 2005; Dicken, 2007; Kanbur and Venables, 2007). 1

FIGURE 8.1 This cartogram resizes national territories by the earnings of the poorest 10th living in each territory, focusing attention on comparative issues of importance for research on space, scale, and inequality. By visualizing the relative scope of inequality across major regions, questions are raised about the causes of similarly deep inequality in both Latin America and Africa vis-à-vis the countries of the Organisation for Economic Co-operation and Development. Striking spatial patterns such as these point to the potential importance of common social and economic histories that situate each of these regions in particular ways within global divisions of labor, commerce, politics, and cultural flows. SOURCE: Worldmapper. Copyright 2006 SASI Group (University of Sheffield) and Mark Newman (University of Michigan).

Systematic comparisons of subnational inequality and its causes across a range of countries, and in the context of global processes, could move the research agenda forward. Prior research has compared patterns and processes of within-country inequality for Britain, the United States, South Africa, and the former Soviet Union to determine how different economic structures, institutional arrangements and processes of discrimination (apartheid, class, gender and race) are associated with distinct patterns of spatial and social inequality (Smith, 1987). Smith’s comparative research is now 20 years old, however, and we lack an adequate understanding of how recent developments are changing economic, social and political landscapes as a result of global financial instability, new global trade regimes, and environmental instability in the wake of the transition from socialist to capitalist, globalized economies in some parts of the world (cf. Mykhenko and Swain, 2010, who provide a contemporary example of research on the links between territorial inequality, post-socialist transition, and the importation of foreign capital).

Studies by Dicken (2007) and Leichenko and O’Brien (2008) in particular highlight the value of focusing on the specific mechanisms of globalization and the role they play in shaping who and where the winners and losers of globalization are found. Their work points to the importance of analyzing the inequality outcomes of international trade treaties, global environmental regulations, global regulations on investments and the activities of transnational corporations, as well as spatial variations in labor standards and laws. Yet to date, the inequality impacts of these seismic shifts in global institutional and societal processes have not been systematically compared as they play out between and within countries around the globe (Murray, 2006; Dicken, 2007). In the next 10 years, researchers will have access to decennial census data and household income surveys (from many countries) that will allow them to represent and understand the spatial and scalar dimensions of inequality—both between and within countries during a period that will likely be characterized by intensifying globalization and economic instability. Against this backdrop, the investigation of the following research questions would be particularly productive.

RESEARCH SUBQUESTIONS

What patterns of inequality are emerging at the subnational scale.

A long tradition of geographical work focuses on developing visualizations of spatial patterns that can facilitate deeper understanding of sociospatial processes. Cartographic representations of inequality across countries and scales reveal current patterns of winners and losers in the face of globalization processes. For example, Glasmeier’s Atlas of Poverty in America (2005) identifies regions in distress: Appalachia, the Mississippi Delta, areas where indigenous people are concentrated, and much of the U.S.-Mexico border region. Drawing on state, county, and metro-scale socioeconomic data across four decades, the Atlas represents the social and spatial dimensions of poverty within each region and identifies vulnerable populations of children, women-headed households, and minorities. This detailed mapping of poverty over time suggests relationships between places and people, raising analytical questions about the intersections of gender, household structure, race/ethnicity, place, and poverty in different parts of the United States ( Figure 8.2 ). This within-country representation of variables associated with poverty provides a model for the type of comparative spatial analyses that are needed across countries.

New geographical visualization techniques also offer insights into linkages between inequality and the multiple consequences of globalization. Professor Danny Dorling’s team at the University of Sheffield is developing geovisualizations of social spatial structures (at a range of scales) that allow the research community to pose new questions about how people’s life chances are distributed and how are they changing ( Figure 8.3 ). 2 This research group has also developed a series of virtual atlases using flow lines and multidimensional scaling to visualize global city networks (see Figure 8.3 ). These visualizations demonstrate how fast Internet connectivity for some people and places changes their possibilities for engaging globalization processes, with different implications for places that remain relatively disconnected.

The digital divide in Internet connectivity could influence the ways in which places are understood in the future, as volunteer geographical information becomes increasingly central to the collection of georeferenced data about our world. Those cities and countries that are relatively underresourced in technologies, relevant education, and Internet connectivity will be poorly represented in terms of data accuracy or the range of information available (elaborated further in Chapter 11 of this report). In the future, teams of researchers could use geovisualizations to model uncertainty in inequality patterns that may result from distinct scenarios of globalization. By representing the possible impacts of global connectivity and isolation, they could inform policy decisions about the implications of connectivity and isolation for access to key resources (land, water, energy, etc.), engagement with the global economy, and environmental alteration at the subnational level (Smith, 1987; Murray, 2006; Moseley and Gray, 2008).

Where and how does market liberalization exacerbate or reduce spatial inequalities?

Market liberalization has been a central facet of globalization since the 1980s. Market liberalization

FIGURE 8.2 A map series showing the spatial distributions of different populations in poverty in the United States. SOURCE: Glasmeier (2005).

entails the global integration of trade and capital markets through free trade agreements and changes in national trade and financial regulations such as tariff barriers and capital controls. These liberalization processes, along with exuberant lending, overconfidence in monetary policy (as an effective control on money and credit supplies), and floating currencies, brought both high economic growth rates and considerable economic turbulence, with dramatically different impacts for different people and places (as in the Latin American debt crisis of the 1980s, the Asian financial crisis of the 1990s, the global financial crisis of 2008; Krugman, 2000). Market liberalization has also led to a reworking and intensification of networks of connectivity between many cities; an expanding role for transnational corporations in global production and consumption networks; and the large-scale privatization, and international ownership, of telecommunications, transport systems, and primary resource extraction in low-income countries (Dicken, 2003).

In recent years, geographical research has yielded important insights into the social and spatial trade-offs

FIGURE 8.3 City connection map that demonstrates how “close” other cities are to London in a virtual space of relationships based entirely on connection values. SOURCE: Social and Spatial Inequalities. Used with permission.

between trade liberalization and inequality (including research focused on economic growth, environmental change, and human vulnerability). For example, Leichenko and O’Brien (2008) have exposed patterns of advantage and harm in agricultural communities in India in the face of twinned processes of market liberalization and climate change. Their work begins from the premise that the inequality effects of global processes have distinct spatial and social expressions (see also Sachs, 2006; Kates and Dasgupta, 2007). Drawing together data on climate impacts on crop yields, changes in plant pollination and competition, and human vulnerability to climate change, Leichenko and O’Brien (2008) constructed maps revealing the regions that are most vulnerable to predicted climate changes across the country (see also the discussion of this study in Chapter 3 ). A geographic information system analysis of the relationship between that map and patterns of agricultural export advantage, import sensitivity, and the resilience of farmers to socioeconomic change allowed them to identify places across India that are “double exposed” to climate change and trade liberalization and places that are less exposed, and therefore are likely to be less vulnerable in the face of these processes ( Figure 8.4 ).

Similar methodologies and tools can be employed to analyze the changing geography of inequality in the face of the twin impacts of market liberalization and climate change (Liverman and Vilas, 2006). Research in this vein will require the construction of integrated datasets from existing national and international sources at a range of spatial scales, including production and trade data, household income surveys, national census data, and United Nations and World Bank data (see Ravallion, 2001; Redding and Venables, 2004). These new datasets can be employed to produce targeted sectoral and regional analyses of understudied economic sectors (e.g., industry and energy systems in the tropics), which in turn can pave the way for research exploring the ways in which a variety of key economic sectors are influenced by global trade and

FIGURE 8.4 Maps depicting district-level response capacity and sensitivities to climate change and import competition. SOURCE: Leichenko and O’Brien (2008).

capital flows in ways that produce shifting landscapes of production, consumption, and vulnerability (Liverman, 2008).

How are poverty, wealth, and consumption interrelated across space and at multiple geographical scales?

Differences in wealth and poverty are often not solely the result of local circumstances; they are produced by relationships that link far-flung places. Geographical scientists investigate how spatial relationships shape inequality, such as the relationships between production in low-income countries and rich-country consumption, or the inequality effects of deploying agricultural lands for domestic foodstuffs or for export crops. They have developed conceptual and analytical tools for tracing the networks of production, consumption, and exchange that link people across world markets and for identifying the processes through which wealth and poverty are explicitly linked. Of particular significance is work on (1) production chains—linked sequences of place-based functions where each stage adds value to the commodity (Dicken, 2007); (2) consumption chains—links between consumption and the conditions of production (Hartwick, 1998); and (3) global commodity chains, which expose prices, and the geographical distribution of value, at each node along the production and marketing trajectory of a specific commodity (Gereffi and Korzeniewicz, 1994; Leslie and Reimer, 1999).

Geographical research on commodity chains is enchancing understanding of the ways in which inequality is reworked through production and consumption linkages. For example, Nepstad et al. (2005) have traced how consumers in high-income countries shape the nature of agricultural commodity chains through an examination of the globalization of soy and beef industries based in the Brazilian Amazon. They developed a network analysis that connects growing fears of bovine spongiform encephalopathy (BSE or mad cow disease) in ration-fed beef in the United States and Europe with increasing demand for grass-fed beef from the Amazon. Their work demonstrates how conditions of production are reworked by pressures from consumers demanding both improved environmental stewardship and better social conditions for workers. Their study reveals that pressures from lender and consumer organizations to reduce the negative socioecological impacts of production are leading to the environmental and social certification of beef, timber, and soybeans. Additional geographical research building on this conceptual and empirical foundation could further elucidate the nature of commodity networks and show how certification

programs rework inequality (e.g., Mutersbaugh, 2003; Tovar et al., 2005; Klooster, 2006).

Bassett’s (2008, 2010) empirical research on cotton commodity chains linking West African agriculture to global markets provides further evidence that poverty and consumption are linked across space and scale (Moseley and Gray, 2008). Bassett explores how patterns of inequality across space and scale are shaped by the linkage of West African cotton farmers’ incomes to market liberalization; relationships between producers, workers, and consumers; and interactions between ecological and social systems. He found that African cotton growers are relatively marginalized in negotiations over prices for seed cotton, fertilizers, and pesticides vis-à-vis ginning and marketing companies, as well as in dealings with cotton trading companies that set prices based on world markets. These negotiations with national cotton companies and the World Trade Organization are central to the setting of global cotton prices and so shape how and where returns to the crop are distributed among growers, ginners, and traders. Bassett’s research also traces the relationship between currency values and farmers’ incomes. For example, cotton trades globally in U.S. dollars, and yet currencies in Burkina Faso and Mali are pegged to the Euro. The recent devaluation of the dollar relative to the Euro thus reduced cotton farmers’ returns on their internationally traded crops. In addition, Bassett’s work reveals that U.S. cotton subsidies result in overproduction by U.S. producers, who generate 40 percent of global cotton production—thereby suppressing global cotton prices. As a result, farmers in West Africa, who do not have access to similar subsidies, face lower prices on international markets, resulting in lowered incomes (see also Friedberg, 2004, for a commodity chain analysis of French bean crops, and Gwynne, 2002, for a study of fruit exports from Chile).

Geographical research aimed at integrating economic, environmental, and social variables across place and scale can shed additional light on the impacts of market liberalization on inequality within states, at the local scale and across the globe. In particular, much could be gained from comparative case studies employing rigorous experimental frameworks that include common questions and metrics to facilitate aggregation and meta-analysis.

An understanding of the causes and consequences of inequality requires consideration of geographical patterns and networks—whether economic, political, or environmental. Spatial analyses that take explicit account of place-to-place variations and scalar differences can be of particular value in the effort to elucidate the complex interactions between globalization and inequality.

From the oceans to continental heartlands, human activities have altered the physical characteristics of Earth's surface. With Earth's population projected to peak at 8 to 12 billion people by 2050 and the additional stress of climate change, it is more important than ever to understand how and where these changes are happening. Innovation in the geographical sciences has the potential to advance knowledge of place-based environmental change, sustainability, and the impacts of a rapidly changing economy and society.

Understanding the Changing Planet outlines eleven strategic directions to focus research and leverage new technologies to harness the potential that the geographical sciences offer.

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• Library of Congress
• Research Guides

Globalization: A Resource Guide

Trends in globalization.

• Introduction
• Defining Globalization
• Historical Analysis
• History of International Economics & Trade
• History of International Finance & Global Markets
• Elements of Globalization
• Globalization and Pandemics
• Organizations & Research Institutions
• Periodicals
• Search the Library's Catalog
• Using the Library of Congress

In terms of social globalization the world remains more connected than ever due to the widespread use of digital technologies. However, since the Great Recession of 2008-2010 a downward trend in economic integration has been observed. 1

In addition, the United Nations identified three mega-trends related to globalization: shifts in production and labor markets, rapid advances in technology, and climate change. 3

Listed below are books, reports, and articles that discuss the trends in globalization and offer guidance for further research. The following titles link to fuller bibliographic information in the Library of Congress Online Catalog . Links to additional online content are included when available.

Internet Resources

The following online resources provide additional information on the trends in globalization.

• DHL Global Connectedness Index External The DHL Global Connectedness Index tracks the depth and breadth of international trade, capital, information, and people flows. It draws upon 3+ million data points to examine globalization worldwide, by region, and across 169 countries. The complete report is downloadable from the site.
• Deglobalization and Its Discontents External Richard N. Haass May 12, 2020. Council on Foreign Relations.
• Fulfilling the Promise of Globalization: Advancing Sustainable Development in an Interconnected World External Speaking before the UN General Assembly’s Second Committee on 13 October 2017, Mr. Liu highlighted three mega-trends related to globalization: “Shifts in production and labor markets; rapid advances in technology; and climate change.” These trends are expected to shape and influence our future.
• Globalization (McKinsey Global Institute) External Reports, analysis, discussion papers and other resources on the topic of globalization from McKinsey Global Institute.
• Globalization in Transition: The Future of Trade and Value Chains (McKinsey Global Institute) External "Global value chains are being reshaped by rising demand and new industry capabilities in the developing world as well as a wave of new technologies. This report analyzes the dynamics of global value chains and finds structural shifts that have been hiding in plain sight."
• IMF Blog External These International Monetary Fund blog provides insights and analysis on economics and finance. The blog posts cover a wide range of topics including Globalization and Financial Markets.
• KOF Globalisation Index (KOF Swiss Economic Institute) External The KOF Globalisation Index measures the economic, social and political dimensions of globalisation.
• The Pandemic Adds Momentum to the Deglobalization Trend External Douglas A. Irwin (PIIE), April 23, 2020 "The COVID-19 pandemic is driving the world economy to retreat from global economic integration. ...This retreat will not mark the end of globalization, a process that has reached a historically high level. But globalization can be reversed, at least partially."
• The State of Globalization in 2023 External By Steven A. Altman and Caroline R. Bastian Harvard Business Review, July 11, 2023 "Plummeting flows of trade, capital, and people at the beginning of the Covid-19 pandemic prompted a wave of speculation about the end of globalization, and Russia’s invasion of Ukraine brought even more predictions of a retreat toward national self-sufficiency. But, according to research for the latest DHL Global Connectedness Index, international flows show no signs of a sustained downturn. The data shows a broad pattern of decoupling between the U.S. and China, but the flows of countries that are geopolitically aligned with the U.S. and China do not — at least yet — indicate a broader split between rival blocs. Nor is there evidence that globalization is giving way to regionalization. While companies do need to adjust for heightened geopolitical tensions, they should not abandon global strategies. Corporate deglobalization, in fact, could be a riskier path than making focused adjustments to mitigate geopolitical risks." — Authors' summary.
• What Makes Globalization Really New? Sociological Views on Our Current Globalization. External By Romain Lecler, Journal of Global History (2019), 14: 3, 355–373 The article discusses six aspects of the contemporary globalization: the invention of the terms ‘global’ and ‘globalization’ themselves; the rise of ‘transmigrations’; the rise of value chains, logistics, and ‘emerging’ countries in international trade; global cities and informational capitalism as new geographies of transnational financial flows; the threat to cultural diversity posed by a globalizing culture; and a sociology of globalization that is less and less monopolized by privileged or specific actors, becoming, on the contrary, increasingly ordinary and widespread.
• World Development Report 2020: Trading for Development in the Age of Global Value Chains (The World Bank) External "Global value chains (GVCs) powered the surge of international trade after 1990 and now account for almost half of all trade. This shift enabled an unprecedented economic convergence: poor countries grew rapidly and began to catch up with richer countries. Since the 2008 global financial crisis, however, the growth of trade has been sluggish and the expansion of GVCs has stalled. Meanwhile, serious threats have emerged to the model of trade-led growth. New technologies could draw production closer to the consumer and reduce the demand for labor. And conflicts among large countries could lead to a retrenchment or a segmentation of GVCs. The World Development Report (WDR) 2020: Trading for Development in the Age of Global Value Chains examines whether there is still a path to development through GVCs and trade. "
• World Development Report 2023: Migrants, Refugees, and Societies (The World Bank) External "World Development Report 2023 proposes an integrated framework to maximize the development impacts of cross-border movements on both destination and origin countries and on migrants and refugees themselves. The framework it offers, drawn from labor economics and international law, rests on a “match and motive” matrix that focuses on two factors: how closely migrants’ skills and attributes match the needs of destination countries and what motives underlie their movements. This approach enables policy makers to distinguish between different types of movements and to design migration policies for each. International cooperation will be critical to the effective management of migration." — from the report summary.
• KOF Swiss Economic Institute, Press release. KOF Globalisation Index: Weaker World Trade Slowing Globalisation External October 23, 2019. Back to text
• Douglas A. Irwin. The pandemic adds momentum to the deglobalization trend. External Peterson Institute for International Economics. April 23, 2020. Back to text
• United Nations General Assembly. Fulfilling the promise of globalization: advancing sustainable development in an interconnected world. Report of the Secretary-General. External 2017. Back to text
• << Previous: Elements of Globalization
• Next: Globalization and Pandemics >>
• Last Updated: Aug 22, 2024 12:04 PM
• URL: https://guides.loc.gov/globalization

• Globalization

When it comes to global economic governance, less can be more if you want increased cooperation, stability, and equitable growth

HKS Professor Dani Rodrik says his new paper shows that a “light model” of international trade governance can reduce U.S.-China tensions and lead to more equitable prosperity worldwide.

An unexpected benefit from globalization: Improved corporate tax collection for developing countries

• International Relations & Security

Harvard Kennedy School faculty discuss the future of China: global relations, Marx and Confucius, and the role of universities

How civic society can bring an end to a global police violence problem

• Development & Economic Growth

Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?

Manufacturing jobs, once the backbone of the modern US economy, have declined as a share of GDP over recent decades, darkening opportunities for middle-class advancement.

Sovereign Debt: 200 Years of Creditor Losses

We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or “haircuts”.

• Education, Training & Labor

Servicing Development: Productive Upgrading of Labor-Absorbing Services in Developing Countries

The future of developing countries lies in services. Enhancing productivity in labor-absorbing services in particular must be an essential priority, for reasons of both growth and equity.

• Democracy & Governance

How to smooth US-China economic relations for the benefit of the global economy: A light model of global economic governance

The U.S.-China conflict is threatening continued global economic prosperity and this has inspired a variety of predictions and prescriptions on the future global order.

Watch & Listen

• Human Rights & Justice

Moral Universalism, Interventionism, and Human Rights as Politics

Gordon Hanson: We were too optimistic about free trade and globalization. It's time to fix that.

Ricardo Hausmann on the impact of Russian sanctions

• Fairness & Justice

Mathias Risse’s “On Trade Justice”

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Globalization: Making sense of the backlash

If you’ve searched “deglobalization” or “nearshoring” or “reshoring” lately, you’re not alone. Google queries of all three terms have surged in recent years.

It’s not hard to figure out why. Wars in Ukraine and now Gaza, U.S. tensions with China and Russia, supply chain breakdowns, and rising populism have all raised doubts about the future of globalization — and whether its promise of a more connected and interdependent world can ever be achieved.

Caroline Freund has a message for the naysayers.

“Deglobalization isn’t happening,” said Freund, the former director for trade, investment, and competitiveness at the World Bank who is now the dean of the School of Global Policy and Strategy at the University of California, San Diego. “What’s actually happening is a reshaping [of the world economy].”

Freund’s insight came during the kickoff session of the SIEPR Fall Policy Forum. The event, held annually by the Stanford Institute for Economic Policy Research (SIEPR), focused this year on the future of globalization and how the United States can help shape the world’s shifting landscape. The Oct. 27 forum convened more than 170 attendees and featured perspectives of top experts from government, business, and academia.

The first thing to keep in mind: Globalization has experienced setbacks before.

“The trajectory of globalization has not been linear over the past 150 years,” said Mark Duggan, The Trione Director at SIEPR and The Wayne and Jodi Cooperman Professor of Economics in the School of Humanities and Sciences, in his opening remarks. “Globalization has clearly had its drawbacks, [but] there is indeed good reason for optimism.”

Access the agenda and recordings of the panel sessions here

The weaponization of economic policy

At the daylong event, featured speakers and audience members delved into a host of major current events affecting U.S. policy at home and abroad — from China’s economic stumbles and Russia’s growing economy despite record-level western sanctions to the U.S. dollar’s seemingly unstoppable reign as the world’s dominant currency and the private sector’s outsized role in the artificial intelligence revolution.

The consensus: More than ever, there’s a need for coordination. Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and a former chief economist at the International Monetary Fund, spoke of the war between Israel and Hamas that began Oct. 7.

“The tensions in the Mideast are going to roil the global economy and global cooperation in a way that is very hard to predict,” Obstfeld said in his keynote. Factor in common threats posed by climate change, pandemics, cyber breaches, and nuclear proliferation and, he said, it’s clear that “global cooperation is more essential than ever,” he said.

But what does that cooperation look like in practice? Right now, it’s about coalitions — whether it’s the U.S. teaming with Europe or Russia partnering with China — and using economic policy as weapons.

“We live in a world of market power that’s used not for economic reasons, but for geopolitical purposes,” said Oleg Itskhoki, an economics professor at UCLA and a speaker on the panel about trade tensions and a return to industrial policy. “Everything is weaponized.”

U.S. policy: Throw sand in the gears

Take, for example, U.S. restrictions on trade with China — in the form of tariffs on imports and export controls aimed at curbing China’s access to advanced semiconductor chips and the tools for making them. Or, consider the severe sanctions imposed by the U.S. and its western allies against Russia for starting a war in Ukraine.

On China tariffs and Russia sanctions, the results so far have been disappointing.

Chinese imports to the U.S. have fallen since tariffs were first imposed in 2016, but the numbers mask another problem, said Freund during the session on trade. Asian imports to the U.S., which have held steady, include products whose parts can be sourced to Chinese suppliers. “There’s still Chinese content in our imports,” she said. “It’s just now coming in a much less transparent way.”

As for Russia, the pain that the U.S. and its allies hoped to inflict on its economy by boycotting purchases of oil and gas and freezing assets hasn’t worked, said Itskhoki. China, India, and Turkey have stepped up trade with Russia. And European goods are making their way to Russia through third parties.

The lesson, Itskhoki said, is that weaponizing economic policy exacts a hefty toll on everyone.

Fellow panelist Emily Blanchard, the chief economist at the U.S. State Department, acknowledged that efforts by the U.S. and its allies to counter Chinese and Russian aggression through economic measures has had setbacks. But that doesn’t mean the West should stop trying.

“The objective is to throw sand into [Russia and China’s] gears,” said Blanchard, who is also a professor at Dartmouth’s Tuck School of Business. This means making it as expensive as possible for them to sustain their aggression and — in Russia’s case — to also compromise the quality of the tools it’s using to try to defeat Ukraine.

“We’re clearly at a crossroads in the way that we in the United States, and countries around the world, approach their international economic policies [and their] domestic policies too,” she said.

Russia + China: A purely tactical alliance

On the newfound alliance between Russia and China, the speakers suggested it might not be as formidable as it seems. The strongest relationship between the two countries in more than 100 years is rooted in their shared perception that “enemies are everywhere,” said Kathryn Stoner, the Mosbacher Director and senior fellow at Stanford’s Center on Democracy, Development and the Rule of Law during a session on Russia and China.

Both Russian President Vladimir Putin and Chinese President Xi Jinping face a similar challenge, panel speakers agreed: Trouble in their economies could lead to political strife.

For Putin, fallout from the war on Ukraine is exacerbating labor shortages and a steep drop in life expectancy linked to the pandemic, Stoner said. For Xi, the “triple whammy” of pandemic lockdowns, unsustainable government debt, and the lowest rate of direct foreign investment in three decades appears to be fueling internal dissent, said Minxin Pei, a political science professor at Claremont McKenna College.

Like Russia, China must grapple with worrisome demographic challenges. For Russia, according to Stoner, it’s a tight labor market and falling life expectancy from COVID-19 deaths and war casualties. For China, its high levels of unemployed youth, Pei said.

“This is a regime that knows that it does not have a popular mandate to the extent it used to have one, and that’s based on the economy,” he said.

Artificial intelligence: Winners and losers

It was standing room-only for a session on the global race to dominate artificial intelligence (AI) — and its far-reaching implications for worldwide security and wealth inequality.

AI will “superpower all the good, bad, and the ugly,” said Fei-Fei Li, the co-director of Stanford’s Human-Centered AI Institute (HAI) and unofficial “godmother” of AI who spoke on the panel.

Among AI’s potential for good: curing cancer, supercharging education, and tackling climate change.

Another speaker, Erik Brynjolfsson, the director of the Stanford Digital Economy Lab and a SIEPR senior fellow, predicted that AI will enable huge leaps in worker productivity in the coming decade that could be double what the Congressional Budget Office is predicting. “We’re (already) seeing eye-popping improvements in productivity,” he said, including in one study he co-authored earlier this year showing a 35 percent boost for junior-level workers.

Still, the panelists agreed that there will be winners and losers in the AI revolution. The risk that it could exacerbate wealth inequality — and undermine globalization’s promise of shared prosperity — is real.

This concern is one reason why the speakers were critical of the private sector’s lead in driving AI innovation. Universities haven’t been able to keep up with the speed and scale of AI advances. The same goes for the public sector.

“There are simply not enough technologists within government to actually be able to responsibly figure out how to govern this technology,” said Daniel Ho, a SIEPR senior fellow and the William Benjamin Scott and Luna M. Scott Professor of Law at Stanford Law School. Ho also serves on the National AI Advisory Committee .

The speakers’ insights proved timely. Three days later, on Oct. 30, President Biden released a widely anticipated executive order calling for AI safeguards . The following day, the United States and China were part of an international consortium that  pledged  at a United Nations summit to work together to address the technology's potentially "catastrophic" risks.

*All photos by Ryan Zhang

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272 Globalization Essay Topics & Globalization Research Topics

Welcome to our list of globalization topics and essay ideas! Here, you will find plenty of current topics about globalization trends, benefits, and challenges. But that’s not all of it! In addition to topic ideas, you will also find examples of research papers and globalization essays. Check them out below!

🔝 Top 7 Globalization Topics for Research

🏆 best essay topics on globalization, ❓ globalization research questions, 👍 good globalization research topics & essay examples, 🌶️ hot globalization ideas to write about, 🎓 most interesting globalization research titles, 💡 simple globalization essay ideas, ✍️ globalization essay topics for college.

• Globalization’ Positive and Negative Effects
• Contemporary Globalization and Its Impact
• Apple Inc. Affected by Globalization and Technology
• Communication Technology and Globalization
• The Effects of Globalization to Employment and International Trade
• The Impact of Technology on Globalization
• Globalization and Its Impact on Society
• The Advantages of Globalization Globalization is the process of growth and interconnection of world economies and cultures, which are aided by transport and trade.
• Apple Inc.’s Globalization Strategy and International Trade This paper will discuss Apple’s globalization strategy, global actions advocated for by this company, and how it facilitates international trade.
• Impacts of Globalization on the Developing Countries The paper evaluates how globalization impacts developing countries. It is the most debated issue in the modern world, with some people supporting and others opposing it.
• Peru – Globalization, Environment, Crime and Disease The paper synthesizes a number of legitimate sources to focus on globalization and its effects on Peru with special relation to environmental issues, crime, and diseases.
• Globalization Impact on Sustainable Agriculture The emphasis on globalization has continued to undermine the pursuit of sustainable agriculture due to the many environmental, social, and economic consequences.
• Is Globalization a Threat or an Opportunity to Developing Countries? The topic on the effects of globalization has generated a lot of debate in trying to analyze its contribution to either the success or failure of some aspects of economies.
• The Effects of Globalization on Sports For many people in the world, globalization is the revolution of the future. Conversely, this is not true as globalization exists in the present day.
• Globalization Impacts on Trade and Employment Globalization refers to the integration of the world markets. It facilitates smooth movement of goods and people from one country to another.
• The Impact of Globalization on World Politics Globalization as the process that creates preconditions for the eventual emergence of World Government, which will exercise an authority over planet’s natural and human resources.
• Globalization in Media: Pros and Cons Globalization in the media sphere is influenced by changes in political and cultural spheres bringing new economic opportunities and financial capitals to media giants.
• Globalization and Cultural Hybridization Globalization affects all spheres of human activity starting from education, policy, management, and ending with art, culture, etc.
• Globalization and Human Resource Policies and Practices The current paper aims to discuss the concept of globalizing HR policies and the potential positive and negative outcomes of this process.
• Evaluating Cultural Dimensions of Globalization The objective of the current paper is to explore the cultural dimensions of globalization from the perspective of its relation to countries and nations.
• Coca-Cola Company’s Strategy & Globalization Issues Multinational corporations are increasing day by day and they are usually criticized because of issues like environmental stability, sustainability etc.
• Pros and Cons of Globalization The advantages of globalization outweigh the disadvantages. The concept has enhanced the rapid developments of impoverished nations.
• Globalization and Health A planned urban society has access to safe and clean drinking water with appropriate sanitation and waste removal mechanisms.
• Americanization Is Not a Synonym for Globalization Globalization is the process of international integration, whereas Americanization means the influence of American culture on other countries’ cultural development.
• Ford Motor Company’s Globalization Strategy This paper assesses Bangladesh and Rwanda as the two potential countries for Ford to globalize its operations. They are among the best fast-growing economies.
• Globalization’s Impact on International Marketing Strategies International marketing strategies are influenced by globalization. The operations of multinational firms are shaped by the confrontation between standardization and adaptation.
• Globalization Advantages and Negative Cultural Impact This paper focuses on globalization. Drivers of the globalization agenda are multinationals corporations, international financial markets, and transnational agencies.
• How Globalization Affects Governance? The process of globalization inevitably affects governance all over the world. In this paper, the peculiarities of the process of affecting governance by globalization will be addressed in detail.
• Netflix’s Globalization in Brazil The modern world has become more connected due to globalization and multinational dependence on areas that support socioeconomic development.
• Bauman’s Concept of Globalization in Understanding the Rise in Human Displacement This paper discusses the concept of globalization as viewed by Bauman, assesses the concept of increasing numbers of refugees, asylum seekers, and economic migrants in the world.
• Globalization Affecting the Role of Leaders in Organizations Globalization is influencing leadership because of the way it affects society through its processes. It has caused changes in the political, social, and economical aspects.
• Ways of Eating Around the World: Impact of Globalization Globalization is essentially to blame for the rapid rise in obesity and foodborne illness resulting from improved access to a diverse range of healthy foods.
• Dell Business Model: Globalization & Corporate Strategy The Dell Computer company research and development department is mandated with the task of advising the company on the nature of products it should manufacture.
• Impact of Globalization on Norms and Experiences around Gender Inequality is one of the most prolonged global debates that have refused to go away despite the great strides made through globalization
• Globalization’s Impact on Education Globalization will likely diversify educational opportunities while diminishing the competitive advantages of weaker educational systems.
• Globalization and Corporate Social Responsibility The topic chosen for this research is globalization and corporate social responsibility because it is a unique and novel concept for transnational businesses.
• Globalization Essence by M. Steger and N. Bisley Globalization: A very short introduction by Manfred Steger and Rethinking globalization by Nick Bisley define the necessity to treat the globalization and consider its complexity.
• Effects of Globalization: The Case of LuLu Group Int To summarize this paper, globalization is an unstoppable interstate integration process, leading to the erasure of national boundaries and the formation of a single cultural layer
• Ethics and Globalization in Business A business will only manage to keep up its reputation if it recognizes the established business ethics in its environment. Every firm must follow to the letter the code of conduct.
• Impact of Globalization on Netflix Company Netflix made two significant strategic moves that led to its success. The company did not explore all the available markets at once but in phases.
• Globalization and Its Ethical Implications The paper states that the negative implications of globalization result in ethical dilemmas as people with diverse backgrounds participate in world development.
• Globalization as a Phenomenon and Its Impacts Globalization is a phenomenon, which has been made possible due to the development of communication technologies and multifaceted relationships among countries.
• Importance of Globalization on International Business Globalization is very important in that it promotes worldwide growth as well as promotes peaceful coexistence globally through understanding.
• “The Globalization of Markets” by Theodore Levitt In his article “The Globalization of Markets,” Theodore Levitt anticipated the effects of globalization and advancement in technology to international business.
• The Impact of Globalization Discussing globalization objectively in its entirety is a challenging endeavor, since it touches upon almost every aspect of the modern world, and its influences differ from one region to the other.
• Globalization and Geographic Information System Globalization is the process by which the globe becomes increasingly interconnected due to the exchange of commodities and services, information, knowledge, and cultural values.
• “The Globalization of Eating Disorders” by Susan Bordo This paper analyzes the text of an article written in 2002 by Susan Bordo, an American professor, and philosopher, whose works are marked by several prestigious awards.
• Why Youth and Community Workers Should Understand Globalization?
• What Has Been the Effect of Globalization on Terrorism?
• Who Are the Main Losers in the Process of Globalization?
• Why Is Customer Service Needed in the Globalization of Logistics?
• Why Resisting Globalization Can Be Reasonable?
• Why Are the Critics So Convinced That Globalization Is Bad for the Poor?
• What Would Our Nation Do Without Globalization and International Trade?
• What Are the Costs and Benefits of Globalization?
• Why Globalization Manufacturing Since the 1980s Has Changed Labor Relations?
• Why Did General Motors fail to Compete With Globalization?
• What Are the Challenges of International Development in the Age of Globalization?
• What Impact Does Globalization Have On E-commerce?
• Does Globalization Benefit Both Developed and Developing Countries?
• What the Public Should Know About Globalization and the World Trade Organization?
• What Are the Positive and Negative Effects of Globalization?
• Why Did Germany’s Hidden Champions Succeed in Globalization?
• Who Benefits From Globalization of Labor?
• Does Economic Globalization Affect Interstate Military?
• What Does the Globalization of Drug Trade Benefit?
• Why Does Globalization Generate Winners and Losers?
• Globalization and Diversity in TEDx Talk Shows This paper examines TEDx talk shows that discuss diversity and globalization issues and how globalization can reduce poverty levels in developing economies.
• Globalization: Managing Across Cultures Managing across culture is a product of globalization, that expatriate from a foreign culture moves to a totally new culture and is required to manage people from diverse cultures and backgrounds.
• Reflection of “Globalization of Missions” Article The “Globalization of Missions: An Exegesis on the Great Commission” article is the author’s call for making proselytizing more aware of non-Western cultures.
• Impact of Globalization on Australia Globalization has enhanced the quality of life in Australia due to the fact that foreign investors are allowed to open up ventures in the country.
• Globalization: More Positive Effects Than Negative Ones Globalization refers to the “increasing interconnectedness of people and places through the converging process of economic, political and cultural change.”
• Coca – Cola: Business Strategy and Globalization The presence of the globalization phenomenon in the Company’s strategy can be proven by its effective presence in more then two hundred countries around the world.
• Globalization Theories in the Business Environment The paper elaborates on the neo-classical, Marxist and structuralist perspectives on globalization before closing with the most concurrent theorem out of the three perspectives.
• Globalization: Challenges and Opportunities for Culture This paper explores the impact of globalization on cultural identity, highlighting both its challenges and positive aspects, and suggests solutions.
• Globalization of Video Games and Its Influence in the Society The research paper describes the positive impact of gaming, such as reducing flashbacks from posttraumatic stress defects and chronic pain reduction.
• Evaluation of the Meaning and Impact of Globalization in Relation to Criminal Justice The globalization process has a significant impact on criminal justice. Globalization has led to increased interdependence among various economies.
• Qualitative Threshold: Globalization and Communication Technologies Globalization is a long-term phenomenon involving a gradual change of events. This process has occurred in distinct phases with each having unique characteristics.
• Globalization and Knowledge Management This paper outlines the knowledge management in the context of globalization and using personal experience with virtual learning.
• Globalization in Modern Business Along with the development of technology, communication, and transportation, it becomes easier for companies to expand the scope of their operations and enter new markets.
• Globalization’s Role for Developing Countries: Zambia In this paper, the results of globalization and its positive and negative consequences are discussed through the case of Zambia and the condition of its economy.
• “Globalization, Lifelong Learning and the Learning Society: Sociological Perspectives: 2” by Peter Jarvis The book by Peter Jarvis “Globalization, Lifelong Learning and the Learning Society: Sociological Perspectives: 2” is a research book with an overall perspective on the value of education.
• Globalization of the SK-II Brand SK-II Brand has been said to concentrate on its core business through innovation, expanding penetration in developing countries and restructuring its existing business.
• The Impact of Racism on Globalization Racism is a great impediment to globalization, the bad blood between the said people of color and those of no color has dealt a big blow to development.
• Leadership in the Context of Globalization This paper aims to outline the issue of leadership in the context of globalization, conduct a GAP analysis, offer recommendations for developing necessary leadership competencies.
• Globalization Influence on Product Development This essay presents a critical analysis of the marketing strategies as they apply to the international marketing efforts of firms in the context of globalization.
• China’s Aviation Industry: Impact of Globalization This paper investigates the impact of globalization on China’s aviation industry. The report covers a wide range of topics, including history, global treaties, and critical forces.
• Effects of Colonialism and Globalization During the era of colonialism, colonies were perceived to be a major source of raw materials for the industries of the developed nations.
• Social Media Impact on Globalization Among the many drivers of globalization, the advancement of digital social media platforms has been one of the most influential.
• John Deere Company in View of Globalization John Deere is one of the most successful agricultural machinery companies in the world today. In 1963, the company became the world’s largest manufacturer.
• The Impact of Globalization on Labor Market and Trade Globalization is the process that refers to the coming together of the international markets. This report examines the impacts of globalization on trade and employment.
• Globalization and the Social Interest of Workers The paper sets out to demonstrate that globalization is not in the social interest of low-wage workers in developing nations and factory workers in the developed countries.
• The Fourth Industrial Revolution and Globalization The fourth industrial revolution has made it possible for countries and manufacturing companies to produce and stabilize their economies.
• Interconnection of Globalization and Culture Despite serious issues, globalization has encouraged the funding of various initiatives in contemporary acts, contributing to the development of the market.
• Relationship Between Urbanization, Globalization, and People The relationship between urbanization, globalization, and people is one of the most interesting and provocative topics in many discussions.
• American Dominant Minority Relations and Impact of Globalization To understand globalization’s effects on American dominant minority relations, it is necessary to turn to the global perspective and look beyond the US.
• Globalization in Anthropological Perspective The anthropological perspective is a powerful model that guides scholars to analyze human diversity and empower individuals from different backgrounds.
• Economic Globalization and Daily Life The stated factors belong to the concept of economic globalization, which implies the process through which states and corporations expand to the global scale.
• Globalization in a Global Economy World economies and societies have come together to work as a global economy by having common means of transportation, communication, and marketing.
• International Organizations Role in Globalization Process The representatives of international organizations have a common agenda: turning the world into a “global village” and prompting the world’s population to think of neoLiberalism.
• Globalization’s Role in Improving Women’s Rights On the one hand, globalization unites people and makes them follow the same standards or use similar opportunities.
• Globalization and Its Consequences: Economic Crossroads Since modern society is moving at a galloping pace towards globalization and world economic integration, it seems most reasonable to reconcile for a moment and consider the economical problems.
• Globalization and Democratization Relationship This paper explores the existing relationship between democracy and globalization. It focuses on democratization, globalization and their imperativeness.
• The Impact of Globalization on Immigration Control Globalization is one of the key factors that influence immigration. The effects are extensive to the extent of complicating the efforts of controlling immigration.
• The Historical Context of Globalization The goal is to answer the study question, “What is the most important historical event that may have given rise to present globalization?”
• Costa Rica and Education Globalization The report will illustrate the background of the trend of remote learning as well as elements correlating with its implementation in the context of Costa Rica.
• Globalization and Its Pros and Cons It is hard to disagree that there is probably nothing universally positive or negative in this world. Everything has a price.
• Globalization and Personal Identity Intersection The conditions dictated by globalization actualize the problem of cultural uniqueness and cultural self-determination, including identity.
• Globalization, Its Defenders and Critics Globalization is an ambiguous process with its advantages and disadvantages. It is impossible without significant changes in the ordinary life of people.
• Globalization and Competition: The USA, Western Europe, Japan The leading tendency of globalization is its presence even in those countries where other trends of the current world economy are weakly and hardly noticeable.
• The Financial Crisis and Its Connection With Globalization This essay examines two audio interviews that raise the issue of globalization and its impact on the economic security and policies of international banks.
• Leadership and Organizational Change: Diversity and Globalization This paper discusses issues of diversity and globalization within the workplace that include differences in primary languages, social statuses, national origins and religions.
• Globalization and Education – Economic, Political and Cultural Dimensions The surge in Information technology usage, increasing interest in the Internet, and global communication have melted the country’s borders in terms of education availability.
• Motivation and Globalization in Multinational Companies Motivation in the case of globalization becomes a burning issue of multinational companies as they should establish the most appropriate way to motivate their employees.
• Globalization and Immigration: Globalization Policies Leaders and citizens in such nations feel threatened by the influx of both legal and illegal immigrants into their nations.
• International Economy. Oakley’s Globalization Theory In “International Political Economy,” Thomas Oakley discusses globalization, its drivers, and its effects on various actors in the international scene.
• “The Globalization of Markets” Book by Levitt Levitt predicted a range of trends that would occur in the global market, including the need to appeal to different types of customers.
• Supply Chain Management in Globalization Era In the accelerating process of globalization, supply chain management is an integral part of most organizations which is essential to a company’s success.
• Air Transport and Its Benefits for Globalization With excellent transportation systems, the world is exposed to better trading in terms of exports and imports of goods and services.
• The Facets of Globalization in Internet Security This paper aims to outline and define interconnections between Internet security and the process of worldwide integration.
• Pop Culture as a Potent Globalization Tool Pop culture popularizes different ideas and makes them familiar to people from various countries, which helps to minimize the number of misunderstandings.
• Globalization and Its Effects on World Economies The interconnectivity of the global community has had its fair share of both positive and negative impacts with either of them producing different outcomes.
• Economic Globalization: The Role of Geography Globalization is by no means a modern phenomenon closely connected with the geographical structure of the world and location of a particular country.
• Human Resources Management and How It Is Affected by Globalization and Technology? HRM functions have been widely affected by the changing trends around the world: various parts of the world are integrating, newer technologies and better concepts are evolving.
• Issues in the International Politics: Globalization Globalization in the international political system is considered to be centralized due to its impact on external links and close connection with political structures and mechanisms
• Regional Integration Inconsistency with Globalization With the term of Globalization being in vogue and regional integration agreements being signed across the globe, the coalition of the concepts has been questioned.
• Three Areas of Concern for Committee on Globalization This report aims to explore the three major problems that are a result of globalization, and that can have a negative impact on the nations in the Global North.
• The Globalization of Walmart Back in the 1990s, Walmart planned to conquer nations with large populations and growing purchasing power: Mexico, Argentina, and Brazil, and China.
• Globalization and Cultural Diversity in the Workplace Cultural diversity should be incorporated into the company’s policies combined with teaching workers this fundamental issue in the business environment.
• The Effect of Globalization on Healthcare Globalization is the phenomenon describing tight relationships between global cultures and economies. It increases the interdependence of the countries.
• How Globalization Influences Citizenship Concept The one force that drives modernity most inescapably is globalization. Globalization led to a reimagining of the concept of citizenship in the context of modern developments.
• Globalization in Education: The Impact of Lockdown on the Learning Gap Using the humanities approach could transform the main focus of the work on how people perceive their own culture and practices.
• Religion, Globalization, and Language in China This research paper examines the problems of religion, globalization, and language from the Chinese perspective.
• Globalization and Use of Fossil Fuel as Environmental Threats Both the process of globalization and the burning of fossil fuels have been significant contributors to the deterioration of the environment’s health on a worldwide scale.
• Reshaping Globalization and Digital Media Over the decades, distinctive events and activities have contributed to the construction of the current global spectrum.
• Education Under Impact of Globalization The negative impact of globalization was the widening gap in access to education. Globalization has made English the main language of education, which can lead to discrimination.
• Globalization and Technological Development Technological development continues to facilitate globalization, with individuals from third-world countries coming to the forefront of the modern workforce.
• The Globalization Impact on Cultural Production Human culture is evolving in the context of globalization, as many states are no longer in colonial relationships. It leads to global hegemony and diminishing diversity.
• Addressing Global Inequality in the Era of Globalization While globalization has led to social, political, and economic increase, it has also given rise to global inequality, particularly through the exploitation of developing countries.
• Globalization and Indigenous Communities in Canada In Canada, indigenous people feel both the austerities of environmental and cultural destruction and the potential for development.
• Netflix: Globalization and Information Research In a three-stage expansion process, Netflix could make strategic decisions and establish effective policies in those markets
• Globalization: Impact on International Business With higher levels of globalization, the overall international business will be safer as there will be more suppliers and manufacturers on the market.
• Response to Globalization Pressure This paper aims to introduce a plan of action to ensure my continued employability as a professional in the sphere of international affairs.
• Globalization and its Impact on the World A phenomenon that gathered speed after World War II, globalization has tremendously impacted the international economy, society, and culture by enabling greater interconnectedness and cross-border exchange of people and ideas. Globalization is a complex phenomenon that has benefited developed countries economically while unfairly distributing wealth to underdeveloped nations and disenfranchising…
• The Globalization Impact on the US Foreign Policy The ability of the US to use its influence to alter international events is limited by globalization. America cannot deal with the issues brought on by globalization on its own.
• Globalization Challenges in Developing Countries and Japan The participation of nations in global trade has several benefits, even though various problems impede countries from accessing global markets.
• Globalization and Technology Impacts on Ethics The evaluation will center on analyzing how technology and globalization have contributed to the spread of poverty in third-world nations, violated individuals’ rights to privacy.
• Globalization and Democratic Peace Theory In the context of globalization, it is necessary to consider the theory of democratic peace, which recognizes democracy as the best form of government for society.
• Globalization: Climate Crisis and Capitalist Ideology One of the main features of the development of the world community in recent decades has been globalization as part of integration processes that are changing the world structure.
• Project Management Analysis and Globalization Technological supply chain management strategies and the development of dependable distribution systems in globalization are crucial components.
• The Phenomenon of Terrorism and Its Relation to Globalization This paper states that the phenomenon of terrorism is tightly connected to the concept of inequality of globalization.
• Globalization and Its Scale in the World Regardless of all opportunities provided by technological progress, the world remains less globalized than the majority of people expect.
• The Social Media Impact on Globalization This paper explains the impact of media on globalization and how it has affected businesses. Many people are currently using social media to run business organizations.
• Globalization and Poverty: Trade Openness and Poverty Reduction in Nigeria Globalization can be defined as the process of interdependence on the global culture, economy, and population. It is brought about by cross-border trade.
• The Impact of Globalization on Business in India and the USA Since globalization started to affect the economy of the USA and India, it has had various positive and negative impacts on business.
• Impact of Progressive Globalization One of the key processes in the development of the world economy on the verge of the XX-XXI centuries is the progressive globalization.
• Globalization After World War I The emergence of the global economy corresponds to the aftermath of World War I, and the battle of governments and markets for control over the field brought unexpected results.
• Globalization and Christian Mission Globalization has changed the landscape of industrial and business environments, and religion was inevitably affected by it, as well.
• Researching the Concept of Globalization The paper aims to analyze the global playing field and support it with arguments why it is considered to be level.
• Globalization: Beauty Sculpt for You Today society is filled with the obsession with promoting a self-image of beauty and perfection. Individuals take extreme measures to reach the goal of a flawless body.
• Ethnic Violence in the Era of Economic Globalization Economic globalization refers to the interdependence of the world’s financial giants due to increased technology and trade across the borders.
• Globalization Impact on Socioeconomic Inequality This paper analyzes the link between globalization and socioeconomic inequality, and how the inequality problem can be mitigated.
• Food and Water Security as Globalization Issues Globalization has several implications for the business environment, among which are the expanded access to resources, and the interdependence of international companies.
• Solving Problems Through Globalization The paper discusses the importance of uniting to create a global world. Globalization makes it easier to solve universal challenges that affect populations.
• Negative Sentiments Against Trade and Globalization Although the authors’ views are robust and applicable to developed economies, rising negative sentiments against trade and globalization remain relevant in developing countries.
• Globalization: Impact on Modern Society Globalization contributes to establishing relationships between individuals, independent social objects, and phenomena, embracing all spheres of people’s lives.
• Anthropocene and Its Role in Globalization The role of the Anthropocene in globalization can hardly be overestimated since, due to human activities, the world is becoming more and more interconnected.
• Globalization Opportunities and Challenges for Companies A company that adheres to the market development strategy should analyze the opportunities and challenges of globalization.
• Globalization Strategies for Multinational Enterprises This report will aim to understand the different approaches to regional and global expansion through strategy, and how they can be implemented by multinational enterprises (MNEs).
• Human Sense of Place in the Context of Globalization In this study, complex questions about rethinking the human sense of place in the context of globalization are posed.
• History of Globalization and World Integration The process of globalization is often viewed as an exclusively modern phenomenon that has arisen due to the development of multinational corporations.
• Hip Hop’s Globalization and Influence of Hip-Hop Music in Japan This paper reviews the Southern Rap Songs era’s influence on hip-hop music development in Japan during the 20th century.
• The Effects of Globalization on the Environment The consequences of globalization can be very obscure. Globalization contributes to civilization as a whole but also inconveniences others.
• The Food and Drug Administration (FDA) and Globalization The paper explains why the FDA has created a global strategy for fulfilling its mission and what are the costs and benefits to society of a more globalized food market.
• Wireless Industry and Globalization for US Economy Various aspects can be analyzed to show that the wireless industry, America’s population growth, and globalization have significantly changed the United States’ economy.
• Globalization: Arguments For and Against The process of globalization continues today, and arguments both in support and against this phenomenon are expressed regularly.
• Global Poverty and Economic Globalization Relations Globalization is a necessary change in our history, as it has endowed us with abundant and fruitful life and various facilities and possibilities.
• “Globalization” by Peter Temin: Article Analysis The current essay is a report on the given article “Globalization,” written by Peter Temin and published in Oxford Review of Economic Policy in 1999.
• Globalization Effect on Social Movements Adapting to communication trends is a common theme in successful movements, which is only a small part of the process known as globalization.
• Globalization and Technology in Health Care The critical change that has to be implemented to improve the process and quality of health care is further reliance on globalization and technology.
• Economics: The Impact of Globalization As the borders between countries erode and different economies and cultures start to interweave, the world begins to be more and more defined by globalization.
• Globalization of Nursing: Infant Mortality Rate in the US and Other States Among the health care issues, infant birth and death indices are of considerable importance. The paper is concerned with highlighting the infant mortality rate.
• Foreign Direct Investment: Globalization of Production The report advises on the attractiveness of the USA and China for Australian companies interested in developing their international markets.
• Globalization and Health Systems in India This research paper examines the effects of globalization on India’s healthcare system. It explores various areas such as healthcare delivery, acquisition, financing, and ethics.
• Globalization: On the Importance of ICT & Transnational Corporations Globalization is the process of increasing cooperation between different nations, and ICT is one of the factors that allows people from different nations to share their culture.
• Geographical Diversification and Globalization With current terms of business operations between countries, it has been possible for businesses to diversify their market by venturing into other local and international markets.
• Economic Globalization and Labour Rights The comprehensive study investigates the impact of economic globalization on labour rights in developing countries.
• Process of Globalization and Nationalist Movements
• Cultural Globalization as the Americanization of the World’s Cultures
• International Finance and Globalization
• Globalization and American Productivity
• Globalization and Economic Inequality
• Tangible & Inevitable: Globalization as a Worldwide Phenomenon
• How Residents of Georgia Understand and React to Globalization
• The Effects of Globalization on Trade
• Capitalism, Climate Change, and Globalization
• Why Globalization Causes Turbulence and Disruption
• Globalization of Healthcare in the US and Haiti
• The Positive and Negative Aspects of Globalization
• Globalization and Related Environmental Issues
• Globalization and the Formation of New Claims
• Overcoming CSR Challenges in the Age of Globalization
• The Dark Side of Globalization
• Outsourcing and Globalization as Driving Force
• Present Day Resistance Historical Roots to the Trade Globalization
• Energy Crisis: The Processes of Globalization and the Unification
• Free Trade as a Fundamental Principle of Modern Globalization
• Chinese Companies and Globalization Issues
• Global Governance Institutions in Context of Globalization
• Globalization and Career of University of East London’s Students
• Globalization: Impact and Consequences
• Role of Globalization in Asian Market
• Globalization and Transformative Process Drivers
• “The Globalization of American Law” by R. D. Kelemen and E. C. Sibbitt
• Globalization Negative Effects on Canadian Labour Union
• Education With Regard to Globalization Issues
• Whether Globalization Makes Consumer Powerless?
• World Is Flat: Globalization Effect
• Globalization and Its Impact on Firms
• Environment: Rapid Increasing in Industrialization and Globalization
• Total Quality Management: Impact of Globalization on Quality
• Contemporary Globalization Since 1914
• Asian Film Industry Globalization
• Impact of New Technologies and Globalization on Literature
• Survival of Minority Ethnic Groups in Globalization
• International Marketing – Impact of Globalization
• “Globalization, Poverty and Inequality” by Kaplinsky
• Globalization’s Impact on Banks in Canada
• Global Politics: Women’s Rights, Economy, Globalization
• TNCs Contribution to Globalization of Retail Industry
• Globalization and Cultural Difference of Societies
• Globalization, the Sex Trade and HIV-AIDS
• Media Production and Connections in Globalization
• China’s Impact on Globalization and International Security
• Geographical Conditions’ Affect of Globalization
• Moving Away From Globalization: Consequences
• Globalization and Russian Influence
• Market Globalization and Global Marketing Pitfalls
• American Popular Culture and Globalization Effects
• Chapters 2 and 9 of “Sociology of Globalization” by Smith
• Human Rights, Globalization and Economic Development
• Globalization Influences Discussed in TED Talks
• Education History and Globalization
• Globalization and National Security Issues
• Germany’ Sovereignty in the Age of Globalization
• Globalization Concept and Its Impact on the State
• Globalization vs. Traditions in Eastern Culture
• Ethics in Reporting: Globalization and Media
• Globalization Effect on Small and Medium Size Business
• Globalization Effect on Developing Countries’ Business
• Hard Rock Café: E-Commerce and Globalization
• Globalization Impact on Trade and Employment
• Leadership and Globalization in the US and Japan
• Identity Politics as a Response to Globalization
• Globalization and Cultural Knowledge of China
• Millenium Development Goals and Globalization
• The Pitfalls of Globalization
• Aspects of Globalization: Positive and Negative Effects
• Spiritual Perspectives on Globalization by Ira Rifkin
• Globalization and Its Benefits for the United States
• Globalization and Businesses in New Economies
• Globalization’s Impact on Economic Development: Opportunities and Challenges
• The Globalization Index and Singapore as the Leading State
• Globalization’s Impact on the U.S. Economy, Politics, and Society
• Modern Imperialism and Economic Globalization
• Child Labor Role in Westernization and Globalization
• Singapore Globalization: Criterias and Ranks
• Globalization’s Prime Principle: Interconnected Holistic Phenomenon
• Globalization and Citizenship in EU

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StudyCorgi. (2021, September 9). 272 Globalization Essay Topics & Globalization Research Topics. https://studycorgi.com/ideas/globalization-essay-topics/

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StudyCorgi . "272 Globalization Essay Topics & Globalization Research Topics." September 9, 2021. https://studycorgi.com/ideas/globalization-essay-topics/.

StudyCorgi . 2021. "272 Globalization Essay Topics & Globalization Research Topics." September 9, 2021. https://studycorgi.com/ideas/globalization-essay-topics/.

These essay examples and topics on Globalization were carefully selected by the StudyCorgi editorial team. They meet our highest standards in terms of grammar, punctuation, style, and fact accuracy. Please ensure you properly reference the materials if you’re using them to write your assignment.

This essay topic collection was updated on June 22, 2024 .