Should-Read: Paul Krugman: A Finger Exercise On Hyperglobalization

Should-Read: Paul Krugman: A Finger Exercise On Hyperglobalization: “I find myself trying to find simple ways to talk about ‘hyperglobalization’… https://krugman.blogs.nytimes.com/2017/06/14/a-finger-exercise-on-hyperglobalization/

…The idea here is to think about the effects of transport costs… the same way trade economists have long thought about ‘effective protection’…. To overcome 10% transport costs this assembly operation must be 38% cheaper than in the advanced country. But this in turn means that even a seemingly small decline in transport costs could have a large effect on the location of production, because it drastically reduces the production cost advantage emerging markets need to have. And it leads to an even more disproportionate effect on the volume of trade, because it leads to a sharp increase in shipments of intermediate goods as well as final goods…. We get a lot of ‘value chain’ trade. This, I think, is what happened after 1990, partly because of containerization, partly because of trade liberalization in developing countries. But it’s also looking more and more like a one-time thing…