Examples of cost drivers in globalization

Political decisions and the extent of globalization It is this framework which decides whether cross-border activities are facilitated, made more difficult or even completely forbidden. At the end of the day, whether economically motivated cross-border activities do actually take place or not depends on the policy frameworks in place. Reducing or even eliminating barriers to trade in goods, services, labor and capital are political decisions. Political decisions: Economic processes are not operating in a political or institutional vacuum.Without these reductions of costs, phenomena such as outsourcing, long-distance trade and global value chains would not be possible. Technology: Due to technical progress, costs of transportation and of communication decreased strongly during the last decades.Concerning international division of labor, it will specialize on the production and export of labor-intensive products. Such a country has an international competitive advantage in manufacturing labor-intensive products.

If a certain economy has a large number of workers but only a small stock of physical capital, the country is labor-abundant and capital-poor. Demography: The size of the population of a country is important for factor endowment differences between countries.In my opinion, there are three main drivers for economic globalization and its different characteristics such as trade (see figure 1), international capital markets, currency markets, migration and more: This interdependence relates both to the exchange of factors of production (labor, capital, technologies, know-how) and the exchange of products (material goods and services, finished and unfinished products, consumer and capital goods). Drivers of economic globalizationД®conomic globalization stands for the economic interconnectedness of countries with the global economy as a whole. Political decisions and institutions are central adjustment screws. But as a matter of fact, the development of globalization is not determined by any laws of nature. Sometimes it seems that the increase of cross-border exchange of goods, services, capital and other factors of production is inevitable. This fact is due to technological progress and different levels of scarcity of resources in individual countries. During the last decades we saw a rapid increase of economic globalization.

Examples of cost drivers in globalization