Attendance Code
684355
Geographies of the global economy
theories
Etieno Enang
[email protected]
Overview
Introduction
Global patterns of economic development
Regional convergence or divergence?
Wrapping up
Global patterns of economic development
• Location and place matters in the global economy
• Flat vs spiky…

Global Production Networks (GPN)
• Grounded in specific places,
organizational networks connect
into geographical networks
• A firm’s organizational ecology
– intra-firm relationships
– inter-firm relationships
– firm–place relationships
– place–place relationships
From Dicken, 2015
(Global Shift, p. 251)
Global patterns of economic development
• Location matters
• Focusing on the developing world
• ‘Winners’ and ‘losers’
• Are parts of the world at different stages of development?
Economic development
• Rostow’s stages of
development
(figure from Geyer & Pickering 2011)
• A: Barter, subsistence
• B: Specialization, infrastructure, surplus
• C: Industrialization,
investments, growth,
political change
• D: Consumer-oriented, services
Economic development
• The WST model
Core
Periphery
(Semi-periphery)
Economic development
• The WST model
Core
Periphery
(Semi-periphery)
• Porter’s stages of
development
Global patterns of economic development
• Can development be ‘jump-started’?
• Governments at all levels play a crucial role
Policies & strategy at all levels
Business environment
From Dicken, 2015
(global shift, p. 184)
Factors, e.g.:
Natural resources
Capital resources
Scientific knowledge
Human resources
Global patterns of economic development
Human resources
• Human capital: Stock of skills that the labour force possesses
(Goldin, 2019)
• Adam Smith, 4th definition of capital, 1776: “The acquisition of (…)
talents during (…) education, study, or apprenticeship, costs a real
expense, which is capital in [a] person. Those talents [are] part of his
fortune [and] likewise that of society” (Smith , 2003, orig publ. 1776)
• Irving Fisher ~ 1890s: earliest use of ‘human capital’
• Jacob Mincer, Becker, Schultz, 1950s-60s: entrepreneurship,
opportunity recognition & successful exploitation
Global patterns of economic
development Human resources
• Modern views (from the Human Capital Report):
Traditional: “function of education and experience”
Business: “economic value set of skills”

Recently: “health (physical, cognitive & mental)”
Global patterns of economic development
Acemoglu D, Gallego F A, Robinson J A, 2014, “Institutions, Human
Capital, and Development” Annual Review of Economics 6(1) 875–
912
• Lipset’s (1959) thesis:
• the process of ‘modernization’ – comprising, inter alia, economic
growth, educational expansion and structural change – drive
institutional change.
– In other words, economic growth derives from a combination of
education, structures and governance
Economic development
Acemoglu D, Gallego F A, Robinson J A, 2014, “Institutions, Human Capital, and
Development” Annual Review of Economics 6(1) 875–912
• North & Thomas’ (1973, pg 2) thesis: TFP = total factor productivity
“the factors we have listed (innovation, economies of scale, education,
capital accumulation, etc.) are not causes of growth; they are growth”
Global patterns of economic development
• Formal institutional strength
Basic conditions & authority
Worldwide Governance Indicators (WGI)
Kaufmann D, Kraay A, Mastruzzi M, 2009, “Governance
Matters VIII: Aggregate and Individual Governance Indicators”
Policy Research Working Paper 21 1–105
Source:
Kaufmann et al
2009, p.6
Global patterns of economic development
• Davis, K on his website (geovisualist)
Economic development
• World Bank on
their website
Global patterns of economic development
• Formal institutional strength or ‘institutional thickness’
Regional indices exist (e.g. QoG) but are typically aimed at EU
See Rodriguez-Pose A, Di Cataldo M, 2015, “Quality of
government and innovative performance in the regions of
Europe” Journal of Economic Geography 15(4) 673–706
• Informal institutions also impactful
Substitutive & complementary
Global patterns of economic development
• ‘Latecomers’ Newly Industrialised Economies (NIEs) are
disadvantaged:
Overcoming history of extractive capitalism
/ colonialism?
• Cost advantages are temporary but they have a ‘clean slate’
• No past technological & organizational commitments
• They can create institutions and governance mechanisms
Economic development
• Maps of Africa and India in 1914
(From brilliantmaps.com)
Global patterns of economic development
• ‘Latecomers’ newly industrialised economies
(NIEs) disadvantaged
Cost advantages are temporary
Overcoming history of extractive capitalism
/ colonialism?
• But they have a clean slate (to some
extent) Fewer institutions
Few technological ‘commitments’
Economic development
• USA in 1745
Global patterns of economic development
• Strategy: import substitution & export orientation
• Trade / FDI policies
Tariff & non-tariff barriers

Global patterns of economic development
• Other policies, e.g.

Raise or lower taxes
Money circulation (interest, etc.)
Financial, labor market, etc.
‘De-nationalization’
• Export processing zones (FDI)
List of special economic zones in India
Global patterns of economic development
• Other policies, e.g.

Raise or lower taxes
Money circulation (interest, etc.)
Financial, labor market, etc.
‘De-nationalization’
• Export processing zones (FDI)
• Trade agreements

Global patterns of economic development
Other considerations
• ‘Seducing’ multinationals to attract mobile investment and jobs:
e.g McDonalds: 1.9m employees, Amazon 1.6m, others…
A chance to develop (FDI, learning, employment, upgrading)
Enabling transfer pricing; cheaper labour costs (“sweatshops”)
Weak environmental/social/labor laws
Economic development
Other considerations
• Shaping factor endowments
• ‘Seducing’ multinationals
Transfer pricing
Sweatshops
But also FDI, learning, employment, upgrading
Global patterns of economic development
Other considerations
• ‘Seducing’ multinationals
A chance to develop (FDI, learning, employment, upgrading)
Enabling transfer pricing; sweatshops
Weak environmental/social/labor laws
• Things can go horribly wrong: Nigeria & Shell
• See Canvass video: the case of Bodo
(Report from the Guardian, 0:00-10:00 minutes)
Global patterns of economic development
The bottom line
Nassif A, Feijó C, Araújo E, 2015, “Structural change and economic development: Is Brazil
catching up or falling behind?” Cambridge Journal of Economics 39(5) 1307–1332
• Drive productivity / competitiveness
• Ensure proper institutions; factor inputs
• Increase demand (import/export); build (domestic) market; diversify
• Upgrade to higher-added value manufacturing / services or even move to services
(but allay risk of ‘early deindustrialization’)
• Reduce technological gap / advance it

Overview
Introduction
Global patterns of economic development
Regional convergence or divergence?
Wrapping up
Convergence-divergence
Convergence-divergence
• Varying growth rates
Convergence-divergence
• Varying growth rates
• What theories exist about convergence?
Gardiner M, Martin R, Tyler P, 2004, “Competitiveness,
Productivity and Economic Growth across the European Regions”
Regional Studies 38(9)1037-1059

Convergence-divergence
• Is the world becoming
more equal?
Life expectancy (link)
Convergence-divergence
• Is the world becoming
more equal?
Convergence-divergence
• Is the world becoming
more equal?
Convergence-divergence
• Is the world becoming
more equal?
• Are inequalities within
countries decreasing?

Convergence-divergence
• Is the world becoming
more equal?
• Are inequalities within
countries decreasing?
• Data from USA (EPI #1, EPI #2 – a political think tank with its fair
share of critics…)
Convergence-divergence
• There are differences. So what?
Chetty R, Stepner M, Abraham S, Lin S, Scuderi B, Turner N,
Bergeron A, Cutler D, 2016, “The association between income and
life expectancy in the United States, 2001-2014” JAMA – Journal of
the American Medical Association 315(16) 1750–1766
Higher income associated with greater longevity/life expectancy;
variations varied across areas- differences in life expectancy
correlated with health behaviours & local area characteristics
Video summarizing their paper (under multimedia)
Convergence-divergence
• What about within the EU?
Borsi M T, Metiu N, 2015, “The evolution of economic convergence
in the European Union” Empirical Economics 48(2) 657–681
Von Lyncker K, Thoennessen R, 2017, “Regional club
convergence in the EU: evidence from a panel data analysis”
Empirical Economics 52(2) 525–553

Convergence-divergence
• What about within the EU?
Borsi M T, Metiu N, 2015, “The evolution of economic convergence
in the European 100 Union”100 Empirical Economics 80 48(2)60 657–681
Source: Von Lyncker & Thoennessen, 2017 p. 538
Source: Von Lyncker & Thoennessen, 2017 p. 539
Convergence-divergence
Other factors of importance
• Migration: negatives and positives
Brain drain

Convergence-divergence
Other factors of importance
• Migration: negatives and positives
Brain drain
Remittances
Circular migration
Diaspora
Wrapping up
• Stages of development?
• Core-periphery?
• Key conditions for growth?
Good institutions, it seems
• Economic divergence
Questions?
Etieno Enang
[email protected]