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Globalization and Economics

Literature Review III

Both Archibugi and Michie eds. (1997) suggest the increasing competition, prompting firms to upgrade their products and processes. Some authors (Archibugi et al., 1999) argue that policies aimed at the creation of technological competence are needed to strengthen national competitiveness and to preserve local well-being.

 

Technically leading high-income countries will face increasing high technology competition, concentrate more on leading-edge and high technologies and accept that poorer countries specialize more in low and medium technologies. (see Welfens, Addison, Audretsch, Gries, and Grupp eds., 1999). International R&D collaboration could become more important as high technology competition will not only raise the share of high technology exports but push countries to increasing rely on imported high tech equipment and the use of international research networks.

 

According to Friedman (2006, pp. 13), the number of U.S. tax returns done in India was increased to 400,000 in year 2005 from 25,000 in year 2003, which is sixteen-fold.

 

A considerable great deal of foreign direct investment (FDI) has been made in past two decades and is expected to grow larger and larger.  Nevertheless, without attempt of debate over whether global capital mobility is greater today than it was before 1914, Obsfeld and Taylor (Bordo, Taylor, and Williamson eds., 2003) suggest that world capital mobility may have flowed more easily to the poorer countries before 1914 than it does today, which is likely untrue.  Globalisation is not only related to higher FDI but also to rising international trade. Firms in EU countries will relocate labor intensive or weakly technology intensive products to Eastern Europe, Asia, Latin America, or Africa (Welfens et al., 1999).

To prosper in this flat world, Friedman (2006, pp.329) insists to get three things right: (a) the infrastructure to connect as efficiently and speedily as possible, (b) the right education and knowledge skills to empower more of people to innovate and do value-added work, and, (c) the right governance-that is, the right tax policies, the right investment and trade laws, the right support for research, the right intellectual property laws as well as the right inspirational leadership. Nevertheless, one may think that such a general proposition on globalisation is of questionable validity and ask, what are the right education and knowledge skills? What are the right tax policies? What are the right investment and trade laws? What is the right support for research?  What are the right intellectual property laws, and what is the right inspirational leadership?

Globalisation is like a train, only going forward, not backward. Krueger (Bordo et al., 2003) contrasts the pre-1914 globalisation era with the present one and argues that although the success of Germany in the pre-1914 era relied much less on access to the global economy, today’s stars such as South Korea have relied extensively on an open trading system to achieve rapid growth since the 1960s.

After reviewing a variety of surveys, Archibugi et al. (1998) recognize the limitation of the knowledge in discovering the determinants of innovation, and the difficulty in both conceptualizing the technological change and measuring its impact on the economy as well as on trade.  Following their suggestions argues that much of the innovation/growth literature is at the aggregate level (macro-level) only and ignores the importance played by sectoral differences.
Published Oct 16 2009, 01:15 AM by admin
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