1. GROWTH AND CRISIS IN THE Globalization and the Collapse of Trade
Economics 1490
GROWTH AND CRISIS IN THE
WORLD ECONOMY
with
Professor Dale W. Jorgenson
Lecture 05: September 15, 2016
Globalization and the Collapse of Trade
Harvard University Department of Economics - Fall 2016

2. Globalization and the Collapse of Trade
Lecture 05: September 15, 2016
Globalization and the Collapse of Trade
Course Outline
1. Introduction.
2. U.S. Financial and Economic Crisis.
3. Asian Economic Miracles.
4. Europe and the U.S.: Convergence and Divergence.
5. Sustainability of Economic Growth.
6. Outlook for the World Economy.

3. Globalization and the Collapse of Trade
Lecture 05: September 15, 2016
Globalization and the Collapse of Trade
Introduction
1. Course Outline.
2. The World Economy since 1990: Growth and Crisis.
3. Comparing Economies: Production and Welfare.
4. The Sources of Growth: Asia, Europe, and the United States.
5. Globalization and the Collapse of Trade.

4. Globalization and the Collapse of Trade
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Globalization and the Collapse of Trade
CAPITAL INPUT AND THE COST OF CAPITAL
PERPETUAL INVENTORY METHOD
where:
K - capital stock
I – investment
 - depreciation rate
RENTAL PRICE OF CAPITAL INPUT
  where:
  c - price of capital input
P - price of investment
r - rate of return
 - asset-specific inflation rate

5. Globalization and the Collapse of Trade Globalization of Trade:
Lecture 05: September 15, 2016
Globalization and the Collapse of Trade
Globalization of Trade:
Steve Jobs Introduces the i-Phone
The i-Phone Supply Chain
All Roads Lead to China
Shenzhen and Singapore, Taiwan, the U.S.
Who Is Foxconn?

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Steve Jobs Introduces the i-Phone4

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Globalization and the Collapse of Trade

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Globalization and the Collapse of Trade

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Globalization and the Collapse of Trade
All Roads Lead to China

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Globalization and the Collapse of Trade

11. Globalization and the Collapse of Trade
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Globalization and the Collapse of Trade
THE APPLE SUPPLY CHAIN
The iPhone and the Software Are Designed by Apple.
Components Are Produced Globally.
The Final Assembly and Packaging Are Done in China.
Most of the Value Is Added in the United States.

12. FOUR TRENDS IN THE FRAGMENTATION OF TRADE
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Globalization and the Collapse of Trade
FOUR TRENDS IN THE FRAGMENTATION OF TRADE
Trend 1: International Fragmentation of Production is Expanding.
Trend 2: More Value-Added from High-Skilled Labor and Capital.
Trend 3: Enhanced Specialization in High-Skilled Labor in High-Income Countries.
Trend 4: Enhanced Specialization in Capital in Emerging Economies.

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Figure Stylized representation of an internationally fragmented value chain

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Globalization and the Collapse of Trade
Table 15.1 Value added shares in final output of automotives from Germany (%).

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Figure 15.2 An accounting framework for global value chains

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Figure 15.3 Schematic outline of a World Input-Output Table (WIOT)

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Table 15.2 Regional value added distribution of final output of manufactures by country-of-completion

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Globalization and the Collapse of Trade
Table 15.2 Regional value added distribution of final output of manufactures by country-of-completion

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Globalization and the Collapse of Trade
Figure 15.4 GVC Incomes in Advanced and Emerging Countries, All Manufactures, 1995–2011

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Figure 15.4 GVC Incomes in Advanced and Emerging Countries, All Manufactures, 1995–2011

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Figure 15.5 Regional Shares in World GVC Income, All Manufactures, 1995–2011 (%)

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30. Globalization and the Collapse of Trade THE FRAGMENTATION OF TRADE
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THE FRAGMENTATION OF TRADE
The Domestic Share of GVC Income Has Declined and the Global Share Has Increased.
Emerging Economies Have Increased Their Share of GVC Income, Relative to Advanced Economies.
The Share of Capital in GVC Income Has Increased Relative to the Share of Labor.
The Collapse of Trade in 2009, the Peak of the Crisis, Was Quickly Reversed in 2010.

31. Globalization and the Collapse of Trade The Great Trade Collapse
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Globalization and the Collapse of Trade
The Great Trade Collapse
Historical Perspective
Simultaneity of the Collapse in Different Countries
Food, Oil, and Manufactures
The Great Recession
Composition of Trade

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Globalization and the Collapse of Trade
Globalization and the Collapse of Trade: Summary Trade Grows Faster than Output and Also Collapses Faster than Output The Explanation is Globalization of the Supply Chain The i-Phone Example: All Roads Lead to China
Value Added Approach to Trade: Trade Flows and Competitiveness