In terms of economic growth, globalisation has caused:
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- Economies of Scale: Globalisation increases opportunities for firms to achieve economies of scale, specialise, and reduce input costs.
- Technological Innovation: Enhanced competition globally drives technological innovation, leading to higher productivity,
- especially in developed countries with access to high levels of FDI.
- Financial Contagion: Financial crises can spread quickly due to interconnected markets,
- highlighting the need for macroeconomic policy coordination (e.g., G20’s formation post-GFC).
In terms of economic development, globalisation has caused
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- Income Inequality: With skilled labour often migrating from developing to advanced economies (brain drain).
- IMF reports a 0.45% annual increase in income inequality over the past three decades.
- easing trade restrictions has provided better market access to exporters, reduced prices, and greater variety
- → can improve living standards
- easing trade restrictions has provided better market access to exporters, reduced prices, and greater variety
- IMF reports a 0.45% annual increase in income inequality over the past three decades.
- Negative Externalities: e.g. environmental degradation and labour exploitation in developing nations.