The following is extracts from a research proposal: May 2003. It was awarded a Marsden award and will be the focus of my public interest research over the next three years.
Keywords: Globalisation & Trade;
SUMMARY
Describe in up to 200 words the nature of your proposed research in plain English for a general audience. This summary should be able to be used for publicity purposes if the proposal is offered funding.
Globalisation has shaped the world economy for the last two centuries. It also has shaped New Zealand, as for instance when refrigeration, together with steam ships and telegraph, led to a New Zealand economy based on pastoral farming selling to Britain. While there was a period of stagnation in the globalisation process in the middle of the twentieth century, innovations such as containerisation and mass air travel revitalised the globalisation pressures after the Second World War. More recently, the information and communication technology revolution has transformed access to information and simplified international contacts. Among the consequences of these changes have been an acceleration of globalisation with less restricted trade in more goods and services, foreign investment and capital flows, the potentiality for substantial human migration (as well as the huge tourist industry), a revolution in information access, and the growth of institutions such as the IMF and the WTO which attempt to regulate international economic activity. Local cultures and the nation state are being transformed. This project will trace these impacts on New Zealand in the past, and today, looking forward to the way globalisation will impact on the future, while contributing to international scholarship on the economics of globalisation.
BACKGROUND
Using only this page, give a context for the proposal by summarising in plain English the state of knowledge in the field.
There are two globalisation debates. At the popular level a plethora of articles and books tend to treat globalisation as a very recent phenomenon. The presentations are often emotional rather than analytic – they rarely define globalisation – although some are of very high quality.[1] At the scholarly level there is a progressive, analytic, international research program which identifies the globalisation phenomenon starting at least in the nineteenth century. The website www.econlit.org identifies almost 7000 items which use ‘globalisation’ or ‘globalization’ although some are repeats, some are popular or of poor quality, and some are focused on particularities.
This project defines globalisation as the consequence of reductions in the costs of distance. This causal-based definition encompasses the OECD phenomenon-based definition of ‘geographical dispersion of industrial and service activities and the cross-border networking of companies’, and includes other phenomena such as migration, technology transfer, capital mobility, and institutions such as the IMF and WTO.
There is frequent mention of transport costs (the most obvious cost of distance) in some of the most interesting globalisation literature,[2] but they are not always given prominence. This focus on reducing costs of distance reflects a standard economic approach of examining the impact of an exogenous change – in this case of transportation technology – on the economy using analytic models. There are few studies which formally model the impact.[3] Where transport costs are prohibitive (as they were for the un-preserved meat around the world before refrigeration) the analytic model is identical to that which studies a prohibitive tariff. Where there is already some trade, the fall in transport costs is either equivalent to a tariff reduction coupled with a productivity gain (as resources are released from the reduced transport costs) or a terms of trade gain.
There have been recent extensions to the standard model of international trade where economies of scale exist (lower costs of distance make it easier to achieve them). They predict intra-industry trade (about a quarter of world trade today, up from almost nothing 50 years ago).[4] Even more disturbing – in terms of traditional theory – the trade points may be indeterminate, while the theory predicts the existence of successful exporting firms which are not obviously advantaged by being in their base country. [3],[4],[5],[6] This has led to considerable theoretical turmoil in trade thinking including such developments as strategic trade theory,[4] and competitive advantage.[6] New Zealand has one of the lowest levels of intra-industry trade among the rich OECD.[7] Another important theoretical development has been a concern with factor mobility – traditional trade theory assumes there is none. This is not just a matter of capital mobility (e.g. foreign direct investment and international capital flows) and labour mobility but also of technology which needs to be re-evaluated in terms of recent research developments including the theory of endogenous technology and information.[8]
Perhaps too, transport costs can be treated as a transaction cost so that part of the standard economics paradigm has some relevance.[9] This possible theoretical extension has only been recently identified, and has yet to be explored, so its promise is tentative.
In summary, international economic relations have become much more complicated in the last fifty years, and economic theory is struggling to adapt. On the whole New Zealand thinking has lagged behind these developments, despite the country’s past and future being fundamentally dependent on the course of globalisation.
References
[1] Examples of interesting work are
Cairncross, F. (2001) The Death of Distance , Texere, London.
Soros, G. (1998) The Crisis of Global Capitalism , Perseus, New York.
Stiglitz, J. (2002) Globalisation and Its Discontents , W.W. Norton & Co, New York.
[2] Examples of interesting work are
O’Rourke, K.H. & J.G. Williamson (1999) Globalization and History , MIT Press, Boston. (Both authors have many other articles on related topics.)
Schwarz, H. M. (2000) States Versus Markets: The Emergence of the Global Economy , St Martin’s Press, New York.
[3] Krugman, P. & A.J. Venables (1995) ‘Globalization and the Inequality of Nations’, Quarterly Journal of Economics , Vol CX, Issue 4 (November 1995) p.857-880.
[4] Helpman, E. & P. Krugman (1985) Market Structure and Foreign Trade , MIT Press, Cambridge, MA.
Helpman, E. & P. Krugman (1989) Trade Policy and Market Structure , MIT Press, Cambridge, MA.
Helpman E. (1994) Technology and Trade , Working Paper 4926, NBER, Cambridge, MA.
Davis, D. “Intraindustry trade: A Heckscher-Ohlin –Ricardo Approach”, Journal of International Economics, 39 (November 1995) p.201-226.
[5] Gormory, R.E. & W.J. Baumol (2000) Global Trade and Conflicting National Interests , MIT Press, Cambridge, MA.
[6] Porter, M.E. (1990) The Competitive Advantage of Nations , Macmillan, London.
[7] Bano, S. (2002) Intra-Industry Trade and Trade Intensities: Evidence from New Zealand . Working Paper 5/02, Department of Economics, University of Waikato.
[8] Easton, B.H. (2003?) Transforming New Zealand (in preparation) reviews endogenous growth theory and suggests how it needs to be adapted to a small open economy such as New Zealand.
[9] Williamson, O. (1985) The Economic Institutions of Capitalism: Firms, Markets, Rational Contracting , The Free Press, New York.
OVERALL AIM OF THE RESEARCH
Using only this page, state the general goals and specific objectives of the research proposal. Emphasise how the research will advance knowledge and increase understanding.
The general goals of this research program are to:
1. Write a book Diminishing Distance: New Zealand in a Globalising World for an international and local audience, with New Zealand as the case study. The proposed structure of the book is described in Section 6.
2 Involve New Zealand in the international scholarly debate on globalisation. Wherever possible the program will link with overseas scholars working on globalisation.
3 Contribute to the international scholarly debate on globalisation by adding the New Zealand experience and by extending some of the analytic models.
4 Help build a scholarly community in New Zealand, involving a variety of disciplines, concerned with globalisation.
5 Where possible, transfer key elements of the scholarly debate on globalisation to the popular debate and to the policy process in New Zealand.
The specific scholarly objectives of the project include the production within the three years of the following scholarly outputs:
(i) A manuscript ready for a publisher of the proposed book Diminishing Distance: New Zealand in a Globalising World.
(ii) At least one article on the analytics of globalisation/reduced distant costs in a suitable scholarly journal.
(iii) At least one article on the political economy of globalisation in a suitable scholarly journal.
(iv) Two articles on distance and New Zealand economic history in suitable scholarly journals.
(v) At least one article on culture, nationalism and globalisation in a suitable scholarly journal.
(vi) At least one article on the role of international institutions in a suitable scholarly journal.
(vii) The establishment of a (probably virtual) New Zealand Centre for Globalisation Studies.
(viii) The promotion of some related research projects, such as the diaspora study and the applied general equilibrium modelling discussed in the next section.
(ix) The presentation of learned papers – essentially preliminary versions of the above publications – to a variety of New Zealand learned conferences, across a number of disciplines (including cultural studies, economics, geography, history, labour studies, and politics) and also to some relevant overseas learned conferences.
Additionally, the project hopes to attain the following not-so-scholarly but nevertheless important specific objectives by
(x) Influencing of public perceptions on globalisation.
(xi) Publishing of a variety of articles and present various public lectures for popular audiences on globalisation and its significance to New Zealand.
(xii) Contributing to public policy by improving policy-makers’ understanding of the globalisation process and the implications for New Zealand.
(xiii) Holding a (self-funding) conference (probably in the third year) which will bring together the scholarly and popular threads on globalisation, and in which policy makers will also be involved.
PROPOSED RESEARCH
This section should cover where appropriate the hypotheses being tested, the methodology to be used, sampling design, and methods of data analysis. Please use a MAXIMUM of 3 pages.
The proposed structure of the book is as follows:
Part I: introduction;
Part II: nineteenth and twentieth century globalisation;
Part III: trade, industries and firms;
Part IV: capital, investment, finance;
Part V: people mobility, migration, diasporas, consumer mobility;
Part VI: technology and information access;
Part VII: sectoral issues;
Part VIII: distributional issues;
Part IX: policy convergence? taxation, regulation, the welfare state;
Part X: culture and identity in a globalised world;
Part XI: the future of the nation state and supra-nationality;
Part XII: conclusion
Year One
The first year will consolidate work already done and make progress in the following areas, although there will be an overlap with work in later years.
1.1 Development of analytic models of the impact of changes in the costs of distance. Initially this will be a report/series of lectures suitable for an advanced economics class (discussions with suitable economics departments are underway). This should lead to at least one learned journal submission. Note that the standard model involves fixed factors. Factor mobility will be investigated in the second year. Work on the possible relevance of transaction costs type models will be preliminary with the expectation the main work will be done in Year Two.[1] [2] [3] [4]
(1.2 Prepare application for research funding of Applied General Equilibrium model to explore the impact of changes in the cost of distance on the cost of structure of the economy. Because the cost of distance varies by commodity and factors as do changes to it, it impacts differently on different tradeable sectors (just as refrigeration did not impact on the grain sector, except by displacement). Only an AGE can explore the quantitative magnitudes. It is proposed to seek funding using the two functioning New Zealand AGE models. This research applicant’s role will be entrepreneurial and supervisory, and his time on the work will be charged to the Marsden grant. The implementation of the AGE model will throw light on the analytic model.) [5] [6] [7]
1.3 Collection of measures of the cost of transport through time. International examples have been collected, but there will also be a systematic attempt to collect a historical data series for New Zealand including freighting goods, travel and telecommunications. (The OECD has recently been using the ratio of c.i.f to c.o.b as a measure for goods.)
1.4 Write a long essay on the Economic History of Nineteenth Century New Zealand from a costs of distance perspective. (New Zealand Journal of History?) Williamson and O’Rourke’s Globalisation and History and Blainey’s The Tyranny of Distance are key here. (1.3 is a part of the exercise.) [8] [9]
1.5 Trade issues, especially transport and agricultural protection. As well as a general survey on the impact of costs of distance on trade, the perspective promises new insights into protection practices. To what extent can the rise in protection in the nineteenth century and the fall in the late twentieth be explained by reducing costs of distance? Can the different experience of agricultural trade be explained, in part, by the fact that one factor (land with climate) is not mobile? [5] [6]
While regional structure is not a primary focus of the study, and (probably) not as important in New Zealand as elsewhere, material on the phenomenon will be gathered and will be incorporated in the essay of 1.4 and 3.1. [3] [10] [11] [12]
Year Two
2.1 As well as advancing any incomplete work from the previous year, year two will focus on extensions of the standard trade model into areas which are crucial to overall globalisation – factor mobility and economy of scale. [1] [2] [3] [4]
2.2 Hopefully the Applied General Equilibrium modelling project will be active this year.
2.2 Systematic investigation of whether the transaction costs models can be used by treating the costs of distance as a transactions cost. [13] [14]
2.3 People mobility issues. There is a robust international research program on labour mobility. The project does not expect to add anything innovative but to apply its conclusions to New Zealand. However the diaspora study (below) promises to add to the understanding of the implications of increased people mobility. There is also the phenomenon of international consumer mobility, where the consumer visits the producer as in the case of tourism and – more recently – education and advanced health care. [1] [2] [3] [15] [16]
(2.4 It is proposed to contribute to diaspora studies using the KEA (Kiwi Expatriates’ Association) data base to survey its members electronically to get a sense of what sorts of contacts the offshore ‘diaspora’ maintain with New Zealand. Reducing distance costs can make a person’s ‘location’ ambiguous as when they are living in more than one country. Funding will be sought in Year Two. The research applicant’s role will be similar to that for the AGE modelling.)
2.5 Capital, investment, finance mobility issues. Again the project does not expect to add anything innovative to the international research program but to apply its conclusions to New Zealand. (However, given the recent calls from very reputable commentators – most recently The Economist – for restrictions on certain sorts of capital flows, this area needs to be closely monitored.) [8] [17]
2.6 Technology issues. Technology is very mobile compared to all other ‘factors’ (with the exception of information). It is not clear whether the project will be able to progress the international debate rather than monitor it and apply it to New Zealand. A particularly relevant issue is that of international technology transfer (i.e. technologies generated in one country and transferred to another). This will have to be closely studied, as will the accompanying phenomenon of the globalisation of intellectual property rights. [8] [16]
2.7 Information Access Issues. It is planned to treat information access issues as distinct from technology issues, although they may be closely related. The most important reductions in the cost of distance in the last quarter century have come from the information and communications technology revolution. Just as refrigeration changed the nineteenth century structure of the New Zealand economy – indeed the development path of New Zealand – perhaps the ICT revolution may have a similar impact in the future by changing New Zealand’s global connectedness. [1] [2] [3]
2.8 Sectoral Issues. This is a generalisation from the previous point of particular changes in the costs of distance changing the sectoral balance of the economy. The program has already noted how parts of the service industry are now more like manufacturing in that their are cost rather than consumer determined. [1] [2] [3] [7] [18]
2.9 Industries and Firms. At this stage it is not clear that the project can make any great theoretical contribution to the intra-industry trade (although much of the literature overlooks the extent to which falls in the cost of distance enable economies of scale to be reaped – there may be a nice little paper here). The main activity of the project will be to apply these theoretical insights to New Zealand. It should be possible to do some, admittedly quick, industry or firm studies. [1] [2] [3] [19]
2.10 Distributional Issues. There is a large literature on globalisation’s impact on the aggregate income distribution. The researcher has already investigated this in New Zealand, and the work will be updated. Additionally, insufficient attention has been paid to the sectoral-factor level. The formal models discussed earlier can be easily extended to tease out this phenomenon. [20] [21]
Year Three
3.1 A long essay, rewriting the Economic History of Twentieth Century New Zealand from a globalisation perspective. [7] [8] [22]
3.2 Policy Convergence and the Future of the Nation State. There is a view that globalisation will limit the interventionist abilities of nation states by driving each towards a minimalist state. This thesis will be explored in regard to the Welfare State, taxation and regulation. [21] [22] [23] [24]
3.3 Culture and Nationalism. European nationalism developed in the nineteenth century with the rise of globalisation. On the other hand it is possible that there will be a cultural convergence or that cultures will cease to be locality based but belong to groups (such as teenagers, or professions). [22] [25] [26] [27] [28]
3.4 Hopefully, the diaspora survey will be implemented.
3.5 Supranational Institutions: Just as nineteenth century reductions in the costs of distance strengthened the regulatory scope of the nation state, the twentieth century reductions seem to be creating supra-national equivalents such as the IMF and the WTO, which like their early nineteenth century are not particularly democratic.
3.6 Possible scenarios of globalisation over the next few decades. Hopefully the study will allow us to predict the future a little better.
3.7 By the third year it should have been possible to establish a (virtual?) New Zealand Centre for Globalisation Studies as a means of focussing New Zealand activity with international scholarship. Alternative sources of funding for its maintenance will be sought.
3.9 It is proposed to hold a conference on globalisation in the third year. It will have scholarly, popular and policy streams. It will be self-funded.
3.10 The manuscript for the book should be completed by the end of the third year.
Notes
It should be emphasised that the existing and proposed research program does not have a policy agenda with a prior policy position. Indeed, it is constantly surprised by policy implications of the findings. [16] [29] [30] [31]
Priority will also given to making the results available to the public and policy makers in addition to being involved in the local and international scholarly debates. The funding includes an allowance for appropriate overseas travel to meet foreign scholars and attend relevant conferences.
References
The following is a list of publications by the researcher which are related to the specific item in the Section.
# indicates the item is currently only published on this website.
* indicates published items which are not on the website.
For items on the website look under the Globalisation Index.
[1] ‘Towards an Analytic Framework for Globalisation’, Journal of Economic and Social Policy (preliminary acceptance) #
[2] New Zealand in A Globalised World #
[3] Globalisation: The Consequences in the Reductions in the Cost of Distance #
[4] Abstract of Globalisation Research Proposal for Marsden Fund Application, 2003. #
[5] The World Food Economy and Its Impact on New Zealand, NZIER Working Paper 94/22, 1994.*
[6] ‘The Treatment of New Zealand in ASE Models of the World Food System’, Proceedings of the Sixteenth Annual Conference of the New Zealand Branch of the Australian Agricultural Economics Society (AERU Discussion Paper, 1991)*
[7] Economy Wide Models of New Zealand, NZIER Research Paper No 33, 1986.*
[8] In Stormy Seas: The Post-war New Zealand Economy (University of Otago Press, 1997)
[9] Towards a Political Economy of New Zealand: The Tectonics of History (Hocken Library, 1994)
[10] Canterbury and Globalisation#
[11] Low Politics: Local Government and Globalisation#
[12] ‘Auckland in a Globalised World’, Proceedings of the Sustainable Auckland Congress , (ARC, 2002)
[13] ‘Is the Resource Management Act Sustainable?’ Planning Quarterly, June 1998, p.5-8.
[14] ‘Applying More-Market to the Environment’ in The Commercialisation of New Zealand (Auckland University Press, 1997) p.36-43. (References [13] & [14] illustrate the researchers familiarity with the transaction cost analysis.)
[15] ‘Globalisation and the Labour Market’, Labour Employment and Work in New Zealand: Proceedings of the Tenth Conference (Department of Geography, VUW, 2003) (in press)#
[16] Transforming New Zealand (in preparation)#
[17] Iraq, Oil and the US Dollar#
[18] Deindustrialisation of New Zealand,’ Labour Employment and Work in New Zealand: Proceedings of the Eighth Conference (Department of Geography VUW, 1999) p.38-46.
[19] The External Impact on the Family Firm#
[20] What has Happened in New Zealand to Income Distribution and Poverty Levels,’ S. Shaver & P. Saunders (ed) Social Policy for the 21st Century: Justice and Responsibility (SPRC, Sydney, 1999) Vol 2, p.55-66.
[21] ‘Income Distribution’, in B. Silverstone, A. Bollard, & R. Lattimore (eds) A Study of Economic Reform: The Case of New Zealand, (North Holland, 1996) p.101-138.
[22] The Nationbuilders (Auckland University Press, 2001)
[23] ‘Globalisation and a Welfare State’, in D. Lamberton (ed) Managing the Global, Globalisation, Employment, and Quality of Life, (I.B. Taurus, 2001) p.163-168.
[24] Globalization and a Welfare State#
[25] ‘Economic Globalisation and National Sovereignty’, in R. Miller (ed) New Zealand Government and Politics, 2ed (OUP, in press)
[26] ‘Different Kinds of Countries and Cities: The Distances Between Them’, Cultures of the Commonwealth, No 9. Spring 2003, p.25-34.
[27] ‘Economic Globalisation and National Sovereignty’, in R. Miller (ed) New Zealand Government and Politics (OUP, 2001) p.14-24.
[28] ‘Globalization and Local Cultures: An Economist’s Perspective’, J. Davies (ed) Globalisation and Local Cultures: Emerging Issues for the 21st Century (NZ UNESCO, 1997), p.20-27.
[29] The Commercialisation of New Zealand (Auckland University Press, 1997)
[30] The Whimpering of the State: Policy after MMP (Auckland University Press, 1999)
[31] Tractatus Developmentalis Economica#