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Question 6

Examine the claim that globalization while beneficial overall has adverse economic consequences for certain firms and households [25]

This is not essentially a macro essay


This is not an essay about Singapore. You should tweak what you know about globalization and address the question on FIRMS & HOUSEHOLDS!

Did you address firms and households?


Did you use micro jargon? Firms: TR, TC, iEOS, COP, profits, PS?

Households (consumers): prices, variety,

quantity, CS, material welfare, SOL? Households (owners of FOPs, such as labour): wages? Derived demand?

COMPARATIVE ADVANTAGE tends to be a

central idea behind Q6 in general. But does this mean regurgitation of numerical examples ALL the time? Think carefully what you want to say when you use numerical examples!!!

As an examiner, I would rather you explain in words. Singapores factor endowments: skilled labour force, high level of expertise, good R&D facilities Hence, comparative advantage lies in capital/knowledge intensive sectors such as pharma/high end electronics. In contrast, China/Thais FE: abundant in cheap unskilled labour/land. Hence CA lies in labour/land intensive sectors such as toys, textiles/rice. [To show opp cost: If both Spore & China were to specialize in textile, Spore has to give up far more pharma than China]

Linking to this question, Hence as trade volumes increase with globalization, firms and households in sectors in which the country has CA would benefit in terms of higher demand, higher profits, higher wages etc. Singapore: high skilled labour, owners of capital etc China: low skilled labour In contrast, firms and HHs in sectors in which countries have CdisA would not benefit as much, if at all, from glob.

Technical stuff Structural UE [tends to be low-skilled labour in DCs]: Erosion of CA by low-cost, labour-abundant countries like India/China Outsourcing Influx of cheap labour

PLUS
Lack of skills and mobility to move up to higher value add

Technical stuff Widening income gap High skilled labour in DCs: DD rise [due to CA]: wages rise
Low skilled labour in DCs: DD falls [due to CdisA]: wages fall SS rises [influx of cheap labour?]: wages fall

Overall, income disparity


PLEASE WRITE WITH ECONOMICS RIGOUR!

How do you get high marks? Did you address certain firms and HHs [or do you talk about them in a generic sense] ?

Those in sectors in which countries have Cas/CdisAs? Those in DCs/LDCs?


Those in open/less open economies?

Conclusions [super impt!]


Some ideas for your consideration Benefits>costs [arguably] F&HHs/countries benefit/lose to different extent depends on the nature/openness of economy? [Taiwan vs India in CSQ] F&HHs/countries benefit/lose in different ways [DCs and LDCs] Gains/costs tend to be distributed inequitably across sectors within countries, and between countries

Conclusions [super impt!]


Governments role is to max gains and min costs through polices such as retraining, safety nets, R&D to develop new CAs, stronger environmental/labour laws? [even the policies by DCs and LDCs are different!] Globalization tends to beneficial, assuming there are no unfair practices that distorts price mechanism: undervalued currency? dumping? African countries: poor infrastructure, lack of institutions, corruption?