Firm in Homeserve foreign markets / source from abroad?

Stay domestic

Export

Export or local production?

Import or local production?

ImportMultinational activity:

horizontalMultinational activity:

vertical

no

yes, serve foreign market

yes, source from abroad

exportlocal

productionimportlocal

production

Part I Introduction

Part IIFirms, trade, and location

Part IIICapital, currency,and crises

Part IV Consequences of globalization Economic consequences

Figure I Firm decision tree and book overview

Data sources: Louis Henri Fournet (1998) and the website http://www.nasa.gov, ‘A baby picture of the universe tells its age’, 11 February 2003.

big bang

first stars

beginning of our galaxy beginning of our solar system

beginning of the geologic erasoldest know n fossil

beginning of photosynthesisend of precambrian era

end of primary era

present time13.7 billion years

10 billion years

200 million years

200 million years

800 million years

5 billion years3.5 billion years

3 billion years

2 billion years

Figure 1.1 ‘Big Bang’ and beyond

Figure 1.2 Development of world population over the last 2,500 years

170 265425

7000

0

1000

2000

3000

4000

5000

6000

7000

-500 0 500 1000 1500 2000year

po

pu

latio

n (

mill

ion

)

Mongol invasions

Black death

30 years war, Ming collapse

Data sources: Kremer (1993, table 1) and UN Population Division World Population Prospects: The 2010 Revision.

0

2

4

6

8

10

1900 1940 1980 2020 2060 2100year

wor

ld p

opul

atio

n (b

illio

n)

Figure 1.3 Development in world population, UN projection to 2100

Data source: UN Population Division World Population Prospects: The 2010 Revision, medium variant

Figure 1.4 GDP and GNP, current $, 2010

10

100

1,000

10,000

100,000

10 100 1,000 10,000 100,000

GDP (current US $, bn)

GN

I (c

urre

nt U

S $

, bn

)

USA

China

Germany

Japan

Luxembourg

Data source: World Bank Development Indicators Online; data are for 167 countries; the thin line is a 45° line; bubbles proportional to size of GDP; double logarithmic scales.

100

1,000

10,000

100,000

100 1,000 10,000 100,000current US $

PP

P in

tern

atio

nal $

Figure 1.5 Correction of GDP per capita for purchasing power, 2010

Data source: World Bank Development Indicators Online.

467 453566

666

7614

100

1,000

10,000

0 500 1000 1500 2000year

Wor

ld G

DP

per

cap

itaFigure 1.6 Development of world per capita income over the last 2,000 years, logarithmic graph

Data source: Maddison Historical Statistics 1-2008 AD; 1990 international Geary-Khamis dollars

Logarithmic graphs

1

10

100

1,000

10,000

1950 1960 1970 1980 1990 2000

A1

A3

B1

B2

B3

C1 C3

Figure 1.7 Advantages and disadvantages of logarithmic graphs

400

200

-400

-200

1 1000 15001600 1700 1800 1900 2000

% above world average(world = 100)

% below world average (country = 100)

ItalyIranIraq

Italy

UKNetherlands

Switzerland

USAAustralia

Many Many

Western

Offshoots

Australia

New

Zealand

New

Zealand

Western

Offshoots

Other

Africa

China

India

Iraq

Figure 1.8 Leaders and laggards in GDP per capita: a widening perspective

Data source: Maddison Historical Statistics 1-2008 AD; deviation relative to world index = 100 for positive and country index = 100 for negative deviations.

Carrying capacity of merchant fleets, 1470-1780

0

200,000

400,000

600,000

800,000

1,000,000

1470 1570 1670 1780

Netherlands Germany Britain France Italy, Portugal, Spain

Figure 1.9 Carrying capacity of European merchant fleets, 1470–1780, metric tons

Data source: Maddison (2001, p. 77); absence of a bar in a year for a particular country /group indicates that no data are available.

Figure 1.10 Two ‘waves’ of globalization, merchandise exports, per cent of GDP

Merchandise exports, % of GDP

4.6

22.8

2.5

11.3

18.7

0

5

10

15

20

25

1870 1890 1910 1930 1950 1970 1990 2010

World USA Japan

Data sources: Maddison (2001, table F-5) in constant 1990 prices, extended to 2010 using WTO International Trade Statistics and World Development Indicators Online.

Figure 1.11 Trade and market integration

price

quantity

A

Home import demand

Foreign export supply

BC

1

1

1

2

paF

pbH

paH

pbF

pc

qa qb qc

price

quantity

A

Home import demand

Foreign export supply

BC

1

1

1

2

paF

pbH

paH

pbF

pc

qa qb qc

Figure 1.12 London external bond spread, 1870–1940, fourteen core and empire bonds

1870 1910 1920 1930 19401890 19001880-10

-5

0

5

10

1870 1910 1920 1930 19401890 19001880-10

-5

0

5

10

Source: Based on Obstfeld and Taylor (2003); the units are percentage points.

Figure 1.13 Foreign capital stocks; assets/world GDP, 1860–2000

0.6

0.4

0.2

01860 1880 1900 19601920 1940 1980 2000

Foreign capital stocks; assets / world GDP0.6

0.4

0.2

01860 1880 1900 19601920 1940 1980 2000

Foreign capital stocks; assets / world GDP

Source: Based on Obstfeld and Taylor (2003).

Figure 1.14 Relative migration flows, Western Europe and Western Offshoots, 1870–2010, per 1,000 inhabitants

-2

0

2

4

6

1870-1913 1914-1949 1950-1973 1974-1998 2000-2010

Western Europe Western Offshoots

Data sources: Net migration in the period (Maddison, 2001, table 3-4) is divided by the (simple) average population and length of the period, normalized per 1,000 inhabitants; updated for the period 2000-2010 with data from UN Population Division, Migration Section; Western Europe consists of Belgium, France, Germany, Italy, Netherlands, Norway, Sweden, Switzerland, and UK.

Figure 1.15 Traditional and globalized fragmented production processes

production block

country Afirm 1

inputs markets

production block 1

country Afirm 1

inputs

markets

production block 4

country Afirm 1

production block 3

country Cfirm 2

production block 2

country Bfirm 1

inputsinputs

inputs

I. traditional production process

II. globalized fragmented production process

service link

service link

service link

service link

production block

country Afirm 1

inputs markets

production block 1

country Afirm 1

inputs

markets

production block 4

country Afirm 1

production block 3

country Cfirm 2

production block 2

country Bfirm 1

inputsinputs

inputs

I. traditional production process

II. globalized fragmented production process

service link

service link

service link

service link

Figure 1.16 Change in night light intensity on the Korean peninsula, 1992-2008

Source: Henderson, Storeygard, and Weil (2011), reprinted with permission