To assess globalization in the sphere of production, one should focus on several key aspects reflecting how production processes and economic activities are integrated and fragmented across countries:
Key Dimensions to Assess Globalization in Production
- Fragmentation of Production: Globalization enables firms to split their production processes internationally, locating each stage where it is most cost-effective. This fragmentation is central to global value chains (GVCs), where production is distributed among resident and non-resident firms across countries
- Role of Multinational Enterprises (MNEs): MNEs play a critical role by coordinating and controlling production activities across borders. Their structures, including factoryless goods production and merchanting, add complexity to global production arrangements and influence economic integration
- Labor Market and Industry Effects: International production fragmentation affects labor demand by shifting less skill-intensive activities abroad while retaining more skill-intensive tasks domestically. This reshapes wage structures and industry location within countries
- Trade and Capital Flows: Assessing globalization involves examining the expansion of cross-border flows of goods, capital, and services, including intermediate goods used in production chains. Reduced trade barriers and advances in transportation and communication facilitate these flows
- Measurement and Analytical Tools: Due to the complexity of global production, traditional economic statistics face challenges. Tools such as trade in value added (TiVA), multi-regional input-output tables, and extended supply-use tables (eSUTs) are used to better capture and analyze global production networks
- Economic and Social Impacts: Consider the broader impacts on technology transfer, infrastructure development, poverty reduction, and changes in industry structure and location at regional and national levels
Practical Steps for Assessment
- Analyze the degree of production fragmentation and the distribution of production stages across countries.
- Study the structure and activities of MNEs involved in global production.
- Evaluate changes in labor markets, including shifts in skill demands and wage patterns.
- Use advanced statistical frameworks and indicators designed to capture global value chains and cross-border production.
- Consider policy and economic implications, including how globalization affects competitiveness and economic development.
In summary, assessing globalization in production requires examining how production is internationally fragmented and coordinated, the role of multinational firms, the impact on labor and industry, and employing specialized measurement tools to capture these complex global interconnections
