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Abstract
Globalization refers to the growing economic interdependence of countries worldwide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology. It presents economies and policymakers with both new opportunities and new challenges. On a broad level, the welfare benefits of globalization are essentially similar to those of specialization, and the widening of markets through trade, emphasized by classical economists. By enabling a greater international division of labor and a more efficient allocation of savings, globalization raises productivity and average living standards, while broader access to foreign products allows consumers to enjoy a wider range of goods and services at lower cost. Globalization can also confer other benefits by, for instance, allowing a country to mobilize a larger volume of financial savings (as investors have access to a wider range of financial instruments in various markets) and increasing the degree of competition faced by firms.
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