Edx Courses. Definition of Terms

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GeorgetownX: GLOBALIZATION’S WINNERS AND LOSERS: CHALLENGES FOR DEVELOPED AND DEVELOPING COUNTRIES

OCTOBER 1, 2013 – NOVEMBER 26, 2013

DEFINITION OF TERMS HANDOUT

1

Key Term Definition Index

Absolute

Advantage

The ability of a country, individual, company or region to produce a good

or service at a lower cost per unit than the cost at which any other entity

produces that good or service. (In absolute terms)

Week 2

Adam Smith An 18th-century philosopher and free-market economist famous for his

ideas about the efficiency of the division of labor and the societal benefits

of individuals' pursuit of their own self-interest. Smith proposed the idea

of the invisible hand, or the tendency of free markets to regulate

themselves by means of competition, supply and demand, and self-

interest.

Week 2

Adjustment

Assistance

A federal program that would assist those affected by any type of US job

dislocation, not just trade related. The assistance program would include

extended unemployment insurance contingent on enrollment in a

qualified vocational training course and help with formal job searches.

These programs would, however, be more expensive.

Week 7

Advanced

Technology

Products List

About 500 of some 22,000 commodity classification codes used in

reporting U.S. merchandise trade are identified as "advanced technology"

codes and they meet the following criteria: The code contains products

whose technology is from a recognized high technology field (e.g.),

biotechnology); these products represent leading edge technology in that

field; and such products constitute a significant part of all items covered

in the selected classification code.

Week 4

Agency An ethical term meaning a person can have some freedom and control

over his or her own life. It is the capacity of an agent to act in a world.

Week 1

Alta Gracia Alta Gracia is a fair trade apparel company located in Alta Gracia,

Dominican Republic. The former building that Alta Gracia was asweatshop. Now they mainly support college apparel in colleges in the

United States.

Week 1

Balance of

Payments (BOP)

A record of all transactions made between one particular country and all

other countries during a specified period of time. BOP compares the

dollar difference of the amount of exports and imports, including all

financial exports and imports. A negative balance of payments means

that more money is flowing out of the country than coming in, and vice

versa.

Week 4

Cap-and-Trade

System

A market-based approach used to control pollution by providing

economic incentives for achieving reductions in the emissions of

pollutants. The government sets a limit or cap on the amount of apollutant that may be emitted, which is allocated or sold to firms. The

transfer of permits is referred to as a trade. In effect, the buyer is paying a

charge for polluting, while the seller is being rewarded for having reduced

emissions. Thus, in theory, those who can reduce emissions most cheaply

will do so, achieving the pollution reduction at the lowest cost to society.

Week 7

Carbon Tax A tax levied on the carbon content of fuels. They offer a potentially cost-

effective means of reducing greenhouse gas emissions.

Week 7






2


Collective Action Defined as any action aiming to improve the group’s conditions (such as

status or power), which is enacted by a representative of the group.

Week 3

Collective ActionProblem

Describes the situation in which multiple individuals would all benefitfrom a certain action and no one can be excluded from the benefits of

free trade; creates incentives to “free ride.”

Week 3

Comparative

Advantage

The ability of a firm, individual, or country to produce goods and/or

services at a lower opportunity cost than other firms or individuals.

Week 2

Currency

Manipulation

The intervention of the natural foreign exchange rate of currencies to

influence the value of the domestic currency. Currency manipulation can

be used to increase profitability of one country over another.

Week 4

David Ricardo A classical economist known for his Iron Law of Wages, labor theory of

value, theory of comparative advantage and theory of rents. David

Ricardo and several other economists also simultaneously andindependently discovered the law of diminishing marginal returns.

Week 2

Dutch Disease When an increase in the exploitation of natural resources results to a

decline in another sector. This occurs when the increase in revenues from

natural resources will make the nation’s currency stronger compared to

that of other nations, resulting in the nation’s exports more expensive

when compared to those of other countries. An increase in the export of

natural resources makes the other sectors less competitive.

Week 1

Earned Income

Tax Credit (EITC)

A refundable tax credit for low and medium income families and

individuals. The EITC is one of the largest anti-poverty tools in America.

The Earned Income Tax Credit can be a negative income tax, and in these

cases results in a positive cash flow for the household whose primaryincome worker does not earn enough money to pay income tax. It is a

way to bolster the income of low skilled workers without the detrimental

effects of a high minimum wage.

Week 1, 7

Economic

Superpower

A nation with a dominant market position in the international system,

which has influence over international events, interests, and political

power.

Week 4

Economies of

Scale

The cost advantages that occurs with an increase in size. The mechanism

behind this theory is that the cost per unit of output generally decreases

with increasing scale as fixed costs are spread out over greater units of

output.

Week 2

EmpiricalEvidence

The evidence acquired by means of observation or experimentation.Empirical evidence shows what "happens" in certain situations or

experimentations.

Week 2, 3,4, 5, 6

Estate Tax A tax imposed on the transfer of the “taxable estate” of a deceased

person, whether such property is transferred via a will or the payment of

life insurance benefits of financial account sums to beneficiaries.

Week 7






3


Exports A good or service sent out from one country to another. The higher the

value of exports exiting a country, compared to the value of imports, the

more positive that country's balance of trade becomes.

Week 1, 2,

3, 4

Externality A consequence of economic activity that is experienced by unrelated

third parties. An externality can be either positive or negative.

Week 3

Extractive

Industry

Transparency

Initiative (EITI)

The EITI is a non-government organization that works to increase

transparency and accountability in the extractive sector. The EITI

reconciles payments disclosed by companies from the oil and mining

industries and government disclosure receipts of payments. The EITI

makes a process overseen by a multi-stakeholder group of governments,

companies, and civil society.

Week 1

Factor Content

Analysis

An analysis of the primary factors used in the production of a good or

service, or a vector of quantities of goods and services. In this class, a

simulation to test the Hecksher-Ohlin Model, in which the most skilled

labor, is exported and the least skilled is imported. The results of this kind

of testing indicated that the results of trade liberalization are not large

enough to account for the kind of disparity in the US.

Week 3

Factors of

Production

An economic term to describe the inputs that are used in the production

of goods or services in the attempt to make an economic profit. The

factors of production include land, labor, capital, and entrepreneurship.

Week 2, 3

Flat National Sales

Tax

A tax system levied upon consumers at the point of sale for goods and

services. The national sales tax would function like a state sales tax; the

tax would be an extra cost added to the retail price of products. This is a

regressive method, meaning it would most hurt those making the leastamount of money, because the tax would take a larger proportion of the

person’s income.

Week 7

Foreign Direct

Investment (FDI)

An investment made by a company or entity based in one country, into a

company or entity based in another country. Entities making direct

investments typically have a significant degree of influence and control

over the company into which the investment is made. Open economies

with skilled workforces and good growth prospects tend to attract larger

amounts of foreign direct investment than closed, highly regulated

economies. Closed off economies with limited skill labor will inhibit

investment in that country.

Week 1, 2, 3

Free Riders Someone who benefits from a resource, good, or service without paying

for any of the cost of the benefit.

Week 3

Gasoline Tax An excise tax imposed on the sale of fuel. The tax is a source of general

revenue, and an eco-tax, to promote ecological sustainability.

Week 7






4


General

Equilibrium

Analysis

General equilibrium theory studies supply and demand fundamentals in

an economy with multiple markets, with the objective of proving that all

prices are at equilibrium. The theory analyzes the mechanism by whichthe choices of economic agents are coordinated across all markets.

General equilibrium theory is distinguished from partial equilibrium

theory by the fact that it attempts to look at several markets

simultaneously rather than a single market in isolation.

Week 3

Globalization The investment of funds and businesses to move beyond domestic and

national markets to other markets around the globe, thereby increasing

the interconnectedness of different markets. Globalization has had the

effect of markedly increasing not only international trade, but also

cultural exchange.

Week 1, 2,

3, 4, 5, 6, 7

Government

Consumption

A measure of the amount of goods or services purchased by the

government.

Week 4

Gross Domestic

Product (GDP)

The market value of all officially recognized final goods and services

produced within a country in a given period of time. The measurement of

GDP per capita (GDP/population) is often used as a measure of a

country’s standard of living.

Week 4

Heckscher-Ohlin

Model

A general equilibrium mathematical model of international trade. The H-

O model is built on David Ricardo’s theory of comparative advantage by

predicting patterns of commerce and production based on the relative

factor endowments of a trading region. The model states that countries

will export products that use their abundant and cheap factors of

production and import products using the countries’ scarce factors.

Week 3

Hubbard, Glenn Glenn Hubbard is an American economist and professor at Columbia

University. He previously served on the Council of Economic Advisors for

the George W. Bush administration.

Week 3, 7

Imports A good or service brought into one country from another. Along with

exports, imports form the backbone of international trade. The higher the

value of imports entering a country, compared to the value of exports,

the more negative that country's balance of trade becomes.

Week 1, 2,

3, 4, 5, 6, 7

Income Tax A tax on individual earnings that is paid to the national government. Week 4, 7

Industrial Policy Government policy to influence, which industries expand and, perhaps

implicitly, which contract, via subsidies, tax breaks, and other aids forfavored industries. The purpose, aside from political favor, may be to

foster competitive advantage where there are beneficial externalities

and/or scale economies.

Week 4

Institutional

Reform

As the name suggests, institutional reforms are type of business reform

that create better business environments. These include facilitating non-

corrupt judicial systems, or enforcing contracts.

Week 2






5


Inter-Industry

Trade (North-

South Trade)

Refers to the exchange of different products belonging to different

industries. This is used in international when countries specialize in one

industry or good over others. For example, more developed countries cancomputer parts whereas less-developed countries can export garments

and footwear.

Week 2

International

Labor

Organization (ILO)

A United Nations entity that is concerned with labor standards and

decent work for all.

Week 1

Intra-Industry

Trade (North-

North Trade)

Refers to the exchange of similar products belonging to the same

industry. This is used in international trade when the same type of good is

traded between countries. For example, more developed countries can

exchange luxury cars or electronics.

Week 2

Investment

Promotion Agency

(IPA)

Most often, a government agency (or occasionally a non-profit

organization functioning similar to a chamber of commerce) whose

mission is to attract investment to a country, state, region or city. The

agency does this by introducing investors to local real estate developers

and other commercial service companies, providing useful statistical

information such as average wages and by managing any investment

incentives that the city, state or country may offer to companies which

invest there.

Week 2

Krugman Model Accounts for the 20th century tendency for countries to trade with similar

countries, which is difficult to explain with the theory of comparative

advantage. The Krugman Model is based upon two key assumptions: that

consumers prefer a diverse choice of brands, and that production favors

economies of scale. For example, consumers' preference for diversity

explains the survival of different versions of cars like Volvo and BMW.However, because of economies of scale, it is not profitable to spread the

production of Volvos all over the world; instead, it is concentrated in a

few factories and therefore in a few countries (or maybe just one). This

logic explains how each country may specialize in producing a few brands

of any given type of product, instead of specializing in different types of

products.

Week 2

Krugman, Paul Paul Krugman is an American economist. He teaches at Princeton

University and writes for The New York Times. His contributions to

economics include New Trade Theory and New Economic Geography. In

2008, Krugman won the Nobel Prize in Economics.

Week 2, 3

Labor Unions A collective that represents workers in many industries that work tocollectively bargain over wages, benefits, and working conditions.

Week 1

Macro Reform In economics, it described economic or business reform that is linked to

the monetary policy of the country. These include lowering inflation or

adjusting the exchange rates.

Week 2






6


Magnified Effect

(Stolper-

Samuelson)

An effect that comes about from the relationship between wages of high

skilled and low skilled workers with the prices of what they are producing.

The Stolper-Samuelson effect predicts that, a high skilled worker will havehigher wages and will be able to purchase a higher quantity of low skilled

goods, and therefore, a greater purchasing power relative to the lower

skilled worker. On the other hand, a lower skilled worker’s wages will go

down, while the price of high skilled goods will go up; they won’t be able

to afford these products, and their relative purchasing power will go

down. The magnified effect is that not only do high skilled workers earn

higher wages, but those wages also purchase more low skilled goods

(whose prices have gone down); the opposite holds true for low skilled

workers. Ultimately, high skilled workers gain over time and low skilled

workers lose over time.

Week 3

Medicare A national social insurance program that guarantees access to health

insurance for Americans aged 65 and older and younger people with

disabilities. As a social insurance program, Medicare spreads the financial

risk associated with illness across society to protect everyone, and thus

has a somewhat different social role from for-profit private insurers,

which manage their risk portfolio by adjusting their pricing according to,

perceived risk.

Week 7

Micro Reform Refers to economic business reforms that affect firms directly. For

example means reforms related to the ease of opening or closing a

business or factory.

Week 2

Minimum Wage The minimum amount of compensation an employee must receive for

performing labor. Minimum wages are typically established by contract orlegislation by the government. As such, it is illegal to pay an employee

less than the minimum wage.

Week 1

Multinational

Corporations

(MNCs)

A corporation that has its facilities and other assets in at least one

country other than its home country. Such companies have offices and/or

factories in different countries and usually have a centralized head office

where they co-ordinate global management. Very large multinationals

have budgets that exceed those of many small countries.

Week 1, 2,

3, 4, 5, 6, 7

Non-Government

Organization

(NGO)

A term used to define groups that are neither government or tradition

for-profit businesses. NGOs typically pursue wider social and/or political

aims.

Week 1

Offshoring When a company moves (some of a company's processes or services)

overseas, esp. in order to take advantage of lower costs, through an

affiliate of the same company.

Week 6, 7

On-the-Job

Training

Training that takes place at the place of work as an employee is doing the

actual job.

Week 3

One-More Stop

Shop

A one more stop shop means that the IPA is working as an intermediary

between the government agencies in country and the potential investor

that are necessary for information and permits.

Week 2






7


One-Stop Shop When the IPA will be the sole interface between host country and

investor to gather permits and legal documents

Week 2

Opportunity Cost The cost of an alternative that must be forgone in order to pursue acertain action. Put another way, the benefits you could have received by

taking an alternative action.

Week 2

Outsourcing When a company moves (some of a company’s processes or services)

overseas, esp. in order to take advantage of lower costs, through another

company.

Week 6, 7

Partial

Equilibrium

Analysis

In economics, analysis that treats one particular sector of the economy as

operating in isolation from the other sectors of the economy. In our class

it is used to examine the number of jobs lost or created.

Week 3

Petroleum

Industry Bill (PIB)

An act in the Nigerian government to establish the legal and regulatory

framework for Nigerian petroleum industries in an effort to increase

transparency and accountability.

Week 1

Price Series A test for a given model in which a selection of goods and services is

priced over time. In our class this was used to test the Stolper-Samuelson

theorem and its effects.

Week 3

Private

Consumption

Used in the GDP equation, private consumption is a measure of the

amount of goods and services by individuals for private use.

Week 4

Private Domestic

Investment

A measure in the GDP equation that measures the economic investment

of nations. This measurement looks as the future productive capacity of

the economy.

Week 4

Product

Differentiation

In economics, it is process in which a firm distinguishes a product or

service from those of its competitors to make it more attractive on themarket.

Week 2, 3

Protectionism Government actions and policies that restrict or restrain international

trade, often done with the intent of protecting local businesses and jobs

from foreign competition. Typical methods of protectionism are import

tariffs; quotas, subsidies or tax cuts to local businesses and direct state

intervention.

Week 3

Public Good A good that is non-excludable to individuals. When people cannot be

excluded from goods. Examples include: fresh air, sidewalks, lighthouses,

and street lighting.

Week 3

Rent-Seeking

Behavior

A method of manipulation when there is an attempt to gain economic

rent (a portion of the income paid for a factor of production in addition to

what is needed to keep it employed and in current use). This is typically

used to hinder activities that would otherwise be used to create new

wealth.






8


Research and

Development

(R&D)

Investigative activities that a business chooses to conduct with the

intention of making a discovery that can either lead to the development

of new products or procedures, or to improvement of existing products orprocedures. Research and development is one of the means by which

business can experience future growth by developing new products or

processes to improve and expand their operations.

Week 6

Resource Curse A paradoxical situation in which countries with an abundance of non-

renewable resources experience stagnant growth or even economic

contraction. As a result, the nation becomes overly dependent on the

price of commodities and overall gross domestic product becomes

extremely volatile. Non-transparent agreements between governments

that lack experience in the extractive industries and multinationals lead to

corruption lack of regulation, and environmental damage. In addition, the

failure to establish proper resource rights and an income distribution

framework can result in the misappropriation of project revenues. The

resource curse is most often witnessed in emerging markets following a

major natural resource discovery.

Week 1

Romer, Christina Christina Romer served as the former Chair of the Council on Economic

Advisors for the Obama Administration. She resigned from that role on

September 3, 2010.

Week 3, 7

Skill-Biased

Technological

Change

As technology becomes more pervasive at all levels of society, workers

have to update their skills to become more technologically savvy. For

example, cars today are equipped with high tech microprocessors, which

an autoworker would need to understand. Both high skilled and low

skilled workers need to update these skills. 80% of the income disparity

comes from the gap between those who can master these new skills andthose who can’t, because they don’t have the opportunity to do so.

Week 3, 7

Social Security A social welfare and insurance program, started in 1935 that pays

benefits to a retired worker. Throughout a worker’s career, the Social

Security Administration keeps track of his or her earnings. The amount of

the monthly benefit to which the worker is entitled depends upon that

earnings record and upon the age at which the retiree chooses to begin

receiving benefits.

Week 7

Stolper-

Samuelson

Theorem

Based on the Heckscher-Ohlin trade theory, the Stolper-Samuelson

theorem describes a relationship between relative prices of output goods

and relative factor rewards. The Stolper-Samuelson Theorem states that a

rise in the relative price of a good will lead to a rise in the return to thatfactor which is used more intensively in the production of the good.

Conversely, this will result to a fall in the return to the other scarce factor.

The Stolper-Samuelson Theorem splits a country into clear winners and

losers.

Week 3






9


Sunrise Industries A colloquial term for a sector or business that is in its infancy, but is

growing at a rapid pace. A sunrise industry is typically characterized by

high growth rates, numerous start-ups and an abundance of venturecapital funding. Sunrise industries generally have plenty of "buzz"

surrounding them as public awareness about the sector increases and

investors get attracted to its long-term growth prospects.

Week 4

Sunset Industries A colloquial term for a sector or business that is decline, one that has

passed its peak or boom periods. For example, analogue recording

technologies for audio or video have been supplanted by digital

equivalents; although analogue equipment is still offered, sales have

declined dramatically and are not expected to recover.

Week 4

Supply and

Demand

In microeconomics, supply and demand is an economic model of price

determination in a market. It concludes that in a competitive market, the

unit price for a particular good will vary until it settles at a point where

the quantity demanded by consumers (at current price) will equal the

quantity supplied by producers (at current price), resulting in an

economic equilibrium for price and quantity.

Week 1, 2

Supply Chains The network created amongst different companies producing, handling

and/or distributing a specific product. Specifically, the supply chain

encompasses the steps it takes to get a good or service from the supplier

to the customer. Supply chain management is a crucial process for many

companies, and many companies strive to have the most optimized

supply chain because it usually translates to lower costs for the company.

Week 2

Sweatshops A working environment that is considered to be unacceptably difficult or

dangerous. These types of conditions could include long working hours,

low pay, and potential violation of labor laws.

Week 1

Trade Adjustment

Assistance

A federal program of the US government to act as a way to reduce the

damaging impact of imports felt by certain sectors of the U.S. economy.

The current structure features four components of Trade Adjustment

Assistance: for Workers, Firms, Farmers, and Communities.

Week 7

Trade Deficit An economic measure of a negative balance of trade in which a country's

imports exceeds its exports. A trade deficit represents an outflow of

domestic currency to foreign markets.

Week 4

Trade Surplus An economic measure of a positive balance of trade, where a country's

exports exceeds its imports. A trade surplus represents a net inflow of

domestic currency from foreign markets, and is the opposite of a tradedeficit, which would represent a net outflow.

Week 4

Trans-Pacific

Partnership

The Trans-Pacific Partnership is a proposed free trade agreement under

negotiation by Australia, Brunei, Chile, Canada, Malaysia, Mexico, New

Zealand, Peru, Singapore, the US, and Vietnam. Japan has expressed its

desire to become a negotiating partner. It is intended to be a high-

standard agreement specifically aimed at emerging trade issues in the

21st century. The secrecy of the negotiations has become a point of

controversy.

Week 3






10


Unfair Trade

Practices

Any fraudulent, deceiving, or dishonest practice in international trade

that is prohibited by law or regulation.

Week 4

Value Added Tax A form of consumption tax. From the perspective of the buyer, it is a taxon the purchase price. For that of the seller, it is a tax only on the value

added to a product, material, or service, from an accounting point of

view, by this stage of its manufacture of distribution. The manufacturer

remits to the government the difference between these two amounts,

and retains the rest for themselves to offset the taxes they had previously

pad on the inputs.

Week 7

Value-Added The amount by which the value of an article is increased at each stage of

its production, exclusive of initial costs.

Week 4

Wage Insurance An insurance program to incentivize people to find new jobs, after losing

a job. A wage insurance program accounts for a fraction of the difference

in wage between the old job and the new one. This program incentivizespeople to go out and find new jobs even if they might pay a little less.

There would be limits and time constraints on this insurance program,

but it can combat the stasis in taking a new job after getting laid off.

Week 7

Wealth Tax A tax based on the accumulated stock of purchasing power, in contrast to

income tax, which is a tax on the flow of assets.

Week 7

Workers' Training

Fund Tax

A tax used to fund worker training programs. To fund the program

employers would be required to pay into a common fund or receive a tax

credit for training their own workers.

Week 3

Youth

Unemployment

A lack of job opportunities for younger workers (typically between the

ages of 15 and 24). Without these jobs, there is very little education and

on-the job training for new additions to the workforce.

Week 1


Absolute

Advantage

The ability of a country, individual, company or region to produce a good

or service at a lower cost per unit than the cost at which any other entity

produces that good or service. (In absolute terms)

Week 2

Adam Smith An 18th-century philosopher and free-market economist famous for his

ideas about the efficiency of the division of labor and the societal benefits

of individuals' pursuit of their own self-interest. Smith proposed the idea

of the invisible hand, or the tendency of free markets to regulate

themselves by means of competition, supply and demand, and self-

interest.

Week 2

Adjustment

Assistance

A federal program that would assist those affected by any type of US job

dislocation, not just trade related. The assistance program would include

extended unemployment insurance contingent on enrollment in a

qualified vocational training course and help with formal job searches.

These programs would, however, be more expensive.

Week 7






11


Advanced

Technology

Products List

About 500 of some 22,000 commodity classification codes used in

reporting U.S. merchandise trade are identified as "advanced technology"

codes and they meet the following criteria: The code contains productswhose technology is from a recognized high technology field (e.g.),

biotechnology); these products represent leading edge technology in that

field; and such products constitute a significant part of all items covered

in the selected classification code.

Week 4

Agency An ethical term meaning a person can have some freedom and control

over his or her own life. It is the capacity of an agent to act in a world.

Week 1

Alta Gracia Alta Gracia is a fair trade apparel company located in Alta Gracia,

Dominican Republic. The former building that Alta Gracia was a

sweatshop. Now they mainly suport college appearl in colleges in the

United States.

Week 1

Balance ofPayments (BOP)

A record of all transactions made between one particular country and allother countries during a specified period of time. BOP compares the

dollar difference of the amount of exports and imports, including all

financial exports and imports. A negative balance of payments means

that more money is flowing out of the country than coming in, and vice

versa.

Week 4

Cap-and-Trade

System

A market-based approach used to control pollution by providing

economic incentives for achieving reductions in the emissions of

pollutants. The government sets a limit or cap on the amount of a

pollutant that may be emitted, which is allocated or sold to firms. The

transfer of permits is referred to as a trade. In effect, the buyer is paying a

charge for polluting, while the seller is being rewarded for having reducedemissions. Thus, in theory, those who can reduce emissions most cheaply

will do so, achieving the pollution reduction at the lowest cost to society.

Week 7

Carbon Tax A tax levied on the carbon content of fuels. They offer a potentially cost-

effective means of reducing greenhouse gas emissions.

Week 7

Collective Action Defined as any action aiming to improve the group’s conditions (such as

status or power), which is enacted by a representative of the group.

Week 3

Collective Action

Problem

Describes the situation in which multiple individuals would all benefit

from a certain action and no one can be excluded from the benefits of

free trade; creates incentives to “free ride.”

Week 3

ComparativeAdvantage

The ability of a firm, individual, or country to produce goods and/orservices at a lower opportunity cost than other firms or individuals.

Week 2

Currency

Manipulation

The intervention of the natural foreign exchange rate of currencies to

influence the value of the domestic currency. Currency manipulation can

be used to increase profitability of one country over another.

Week 4






12


David Ricardo A classical economist known for his Iron Law of Wages, labor theory of

value, theory of comparative advantage and theory of rents. David

Ricardo and several other economists also simultaneously andindependently discovered the law of diminishing marginal returns.

Week 2

Dutch Disease When an increase in the exploitation of natural resources results to a

decline in another sector. This occurs when the increase in revenues from

natural resources will make the nation’s currency stronger compared to

that of other nations, resulting in the nation’s exports more expensive

when compared to those of other countries. An increase in the export of

natural resources makes the other sectors less competitive.

Week 1

Earned Income

Tax Credit (EITC)

A refundable tax credit for low and medium income families and

individuals. The EITC is one of the largest anti-poverty tools in America.

The Earned Income Tax Credit can be a negative income tax, and in these

cases results in a positive cash flow for the household whose primary

income worker does not earn enough money to pay income tax. It is a

way to bolster the income of low skilled workers without the detrimental

effects of a high minimum wage.

Week 1, 7

Economic

Superpower

A nation with a dominant market position in the international system

which has influence over international events, interests, and political

power.

Week 4

Economies of

Scale

The cost advantages that occurs with an increase in size. The mechanism

behind this theory is that the cost per unit of output generally decreases

with increasing scale as fixed costs are spread out over greater units of

output.

Week 2

Empirical

Evidence

The evidence acquired by means of observation or experimentation.

Empirical evidence shows what "happens" in certain situations or

experimentations.

Week 2, 3,

4, 5, 6

Estate Tax A tax imposed on the transfer of the “taxable estate” of a deceased

person, whether such property is transferred via a will or the payment of

life insurance benefits of financial account sums to beneficiaries.

Week 7

Exports A good or service sent out from one country to another. The higher the

value of exports exiting a country, compared to the value of imports, the

more positive that country's balance of trade becomes.

Week 1, 2,

3, 4

Externality A consequence of economic activity that is experienced by unrelated

third parties. An externality can be either positive or negative.

Week 3

Extractice

Industry

Transparency

Initiative (EITI)

The EITI is a non-government organization that works to increase

transparency and accountability in the extractive sector. The EITI

reconciles payments disclosed by companies from the oil and mining

industries and government disclosure receipts of payments. The EITI

makes a process overseen by a multi-stakeholder group of governments,

companies, and civil society.

Week 1

Factor Content

Analysis

An analysis of the primary factors used in the production of a good or

service, or a vector of quantities of goods and services. In this class, a

Week 3






13


simulation to test the Hecksher-Ohlin Model, in which the most skilled

labor is exported and the least skilled is imported. The results of this kind

of testing indicated that the results of trade liberalization are not largeenough to account for the kind of disparity in the US.

Factors of

Production

An economic term to describe the inputs that are used in the production

of goods or services in the attempt to make an economic profit. The

factors of production include land, labor, capital, and entrepreneurship.

Week 2, 3

Flat National Sales

Tax

A tax system levied upon consumers at the point of sale for goods and

services. The national sales tax would function like a state sales tax; the

tax would be an extra cost added to the retail price of products. This is a

regressive method, meaning it would most hurt those making the least

amount of money, because the tax would take a larger proportion of the

person’s income.

Week 7

Foreign DirectInvestment (FDI)

An investment made by a company or entity based in one country, into acompany or entity based in another country. Entities making direct

investments typically have a significant degree of influence and control

over the company into which the investment is made. Open economies

with skilled workforces and good growth prospects tend to attract larger

amounts of foreign direct investment than closed, highly regulated

economies. Closed off economies with limited skill labor will inhibit

investment in that country.

Week 1, 2, 3

Free Riders Someone who benefits from a resource, good, or service without paying

for any of the cost of the benefit.

Week 3

Gasoline Tax An excise tax imposed on the sale of fuel. The tax is a source of general

revenue, and an eco-tax, to promote ecological sustainability.

Week 7

General

Equilibrium

Analysis

General equilibrium theory studies supply and demand fundamentals in

an economy with multiple markets, with the objective of proving that all

prices are at equilibrium. The theory analyzes the mechanism by which

the choices of economic agents are coordinated across all markets.

General equilibrium theory is distinguished from partial equilibrium

theory by the fact that it attempts to look at several markets

simultaneously rather than a single market in isolation.

Week 3

Globalization The investment of funds and businesses to move beyond domestic and

national markets to other markets around the globe, thereby increasing

the interconnectedness of different markets. Globalization has had the

effect of markedly increasing not only international trade, but also

cultural exchange.

Week 1, 2,

3, 4, 5, 6, 7

Government

Consumption

A measure of the amount of goods or services purchased by the

government.

Week 4

Gross Domestic

Product (GDP)

The market value of all officially recognized final goods and services

produced within a country in a given period of time. The measurement of

GDP per capita (GDP/population) is often used as a measure of a

country’s standard of living.

Week 4






14


Heckscher-Ohlin

Model

A general equilibrium mathematical model of international trade. The H-

O model is built on David Ricardo’s theory of comparative advantage by

predicting patterns of commerce and production based on the relativefactor endowments of a trading region. The model states that countries

will export products that use their abundant and cheap factors of

production and import products using the countries’ scarce factors.

Week 3

Hubbard, Glenn Glenn Hubbard is an American economist and professor at Columbia

University. He previously served on the Council of Economic Advisors for

the George W. Bush administration.

Week 3, 7

Imports A good or service brought into one country from another. Along with

exports, imports form the backbone of international trade. The higher the

value of imports entering a country, compared to the value of exports,

the more negative that country's balance of trade becomes.

Week 1, 2,

3, 4, 5, 6, 7

Income Tax A tax on individual earnings that is paid to the national government. Week 4, 7

Industrial Policy Government policy to influence which industries expand and, perhaps

implicitly, which contract, via subsidies, tax breaks, and other aids for

favored industries. The purpose, aside from political favor, may be to

foster competitive advantage where there are beneficial externalities

and/or scale economies.

Week 4

Institutional

Reform

As the name suggests, institutional reforms are type of business reform

that create better business environments. These include facilitating a

non-corrupt judigical systems, or enforcing contracts.

Week 2

Inter-Industry

Trade (North-

South Trade)

Refers to the exchange of different products belonging to different

industries. This is used in international when when countries specialize in

one industry or good over others. For example, more developed countries

can computer parts whereas less-developed countries can export

garments and footwear.

Week 2

International

Labor

Organization (ILO)

A United Nations entity that is concerned with labor standards and

decent work for all.

Week 1

Intra-Industry

Trade (North-

North Trade)

Refers to the exchange of similar products belonging to the same

industry. This is used in international trade when the same type of good is

traded between countries. For example, more developed countries can

exchange luxury cars or electronics.

Week 2

Investment

Promotion Agency

(IPA)

Most often, a government agency (or occasionally a non-profit

organization functioning similar to a chamber of commerce) whose

mission is to attract investment to a country, state, region or city. The

agency does this by introducing investors to local real estate developers

and other commercial service companies, providing useful statistical

information such as average wages and by managing any investment

incentives that the city, state or country may offer to companies which

invest there.

Week 2






15


Krugman Model Accounts for the 20th century tendency for countries to trade with similar

countries, which is difficult to explain with the theory of comparative

advantage. The Krugman Model is based upon two key assumptions: thatconsumers prefer a diverse choice of brands, and that production favors

economies of scale. For example, consumers' preference for diversity

explains the survival of different versions of cars like Volvo and BMW.

However, because of economies of scale, it is not profitable to spread the

production of Volvos all over the world; instead, it is concentrated in a

few factories and therefore in a few countries (or maybe just one). This

logic explains how each country may specialize in producing a few brands

of any given type of product, instead of specializing in different types of

products.

Week 2

Krugman, Paul Paul Krugman is an American economist. He teaches at Princeston

University and writes for The New York Times. His contributions to

economics include New Trade Theory and New Economic Geography. In

2008, Krugman won the Nobel Prize in Economics.

Week 2, 3

Labor Unions A collective that represents workers in many industries that work to

collectivley bargain over wages, benefits, and working conditions.

Week 1

Macro Reform In economics, it described economic or business reform that is linked to

the monetary policy of the country. These include lowering inflation or

adjusting the exchange rates.

Week 2

Magnified Effect

(Stolper-

Samuelson)

An effect that comes about from the relationship between wages of high

skilled and low skilled workers with the prices of what they are producing.

The Stolper-Samuelson effect predicts that, a high skilled worker will have

higher wages and will be able to purchase a higher quantity of low skilled

goods, and therefore, a greater purchasing power relative to the lower

skilled worker. On the other hand, a lower skilled worker’s wages will go

down, while the price of high skilled goods will go up; they won’t be able

to afford these products, and their relative purchasing power will go

down. The magnified effect is that not only do high skilled workers earn

higher wages, but those wages also purchase more low skilled goods

(whose prices have gone down); the opposite holds true for low skilled

workers. Ultimately, high skilled workers gain over time and low skilled

workers lose over time.

Week 3

Medicare A national social insurance program that guarantees access to health

insurance for Americans aged 65 and older and younger people with

disabilities. As a social insurance program, Medicare spreads the financial

risk associated with illness across society to protect everyone, and thus

has a somewhat different social role from for-profit private insurers,

which manage their risk portfolio by adjusting their pricing according to

perceived risk.

Week 7

Micro Reform Refers to economic business reforms that affect firms directly. For

example means reforms related to the ease of opening or closing a

business or factory.

Week 2






16


Minimum Wage The minimum amount of compensation an employee must receive for

performing labor. Minimum wages are typically established by contract or

legislation by the government. As such, it is illegal to pay an employeeless than the minimum wage.

Week 1

Multinational

Corporations

(MNCs)

A corporation that has its facilities and other assets in at least one

country other than its home country. Such companies have offices and/or

factories in different countries and usually have a centralized head office

where they co-ordinate global management. Very large multinationals

have budgets that exceed those of many small countries.

Week 1, 2,

3, 4, 5, 6, 7

Non-Government

Organization

(NGO)

A term used to define groups that are neither government or tradition

for-profit businesses. NGOs typically pursue wider social and/or political

aims.

Week 1

Offshoring When a company moves (some of a company's processes or services)

overseas, esp. in order to take advantage of lower costs, through an

affiliate of the same company.

Week 6, 7

On-the-Job

Training

Training that takes place at the place of work as an employee is doing the

actual job.

Week 3

One-More Stop

Shop

A one more stop shop means that the IPA is working as an intermediary

between the government agencies in country and the potential investor

that are necessary for information and permits.

Week 2

One-Stop Shop When the IPA will be the sole interface between host country and

investor to gather permits and legal documents

Week 2

Opportunity Cost The cost of an alternative that must be forgone in order to pursue a

certain action. Put another way, the benefits you could have received by

taking an alternative action.

Week 2

Outsourcing When a company moves (some of a company’s processes or services)

overseas, esp. in order to take advantage of lower costs, through another

company.

Week 6, 7

Partial

Equilibrium

Analysis

In economics, analysis that treats one particular sector of the economy as

operating in isolation from the other sectors of the economy. In our class

it is used to examine the number of jobs lost or created.

Week 3

Petroleum

Industry Bill (PIB)

An act in the Nigerian government to establish the legal and regulatory

framework for Nigerian petroleum industries in an effort to increase

transparency and accountability.

Week 1

Price Series A test for a given model in which a selection of goods and services is

priced over time. In our class this was used to test the Stolper-Samuelsontheorem and its effects.

Week 3

Private

Consumption

Used in the GDP equation, private consumption is a measure of the

amount of goods and services by individuals for private use.

Week 4

Private Domestic

Investment

A measure in the GDP equation that measures the economic investment

of nations. This measurement looks as the future productive capacity of

the economy.

Week 4






17


Product

Differentiation

In economics, it is process in which a firm distinguishes a product or

service from those of its competitors to make it more attractive on the

market.

Week 2, 3

Protectionism Government actions and policies that restrict or restrain international

trade, often done with the intent of protecting local businesses and jobs

from foreign competition. Typical methods of protectionism are import

tariffs, quotas, subsidies or tax cuts to local businesses and direct state

intervention.

Week 3

Public Good A good that is non-excludable to individuals. When people cannot be

excluded from goods. Examples include: fresh air, sidewalks, lighthouses,

and street lighting.

Week 3

Rent-Seeking

Behavior

A method of manipulation when there is an attempt to gain economic

rent (a portion of the income paid for a factor of production in addition to

what is needed to keep it employed and in current use). This is typically

used to hinder activities that would otherwise be used to create new

wealth.

Week 1

Research and

Development

(R&D)

Investigative activities that a business chooses to conduct with the

intention of making a discovery that can either lead to the development

of new products or procedures, or to improvement of existing products or

procedures. Research and development is one of the means by which

business can experience future growth by developing new products or

processes to improve and expand their operations.

Week 6

Resource Curse A paradoxical situation in which countries with an abundance of non-

renewable resources experience stagnant growth or even economic

contraction. As a result, the nation becomes overly dependent on the

price of commodities and overall gross domestic product becomesextremely volatile. Non-transparent agreements between governments

that lack experience in the extractive industries and multinationals lead to

corruption, lack of regulation, and environmental damage. In addition,

the failure to establish proper resource rights and an income distribution

framework can result in the misappropriation of project revenues. The

resource curse is most often witnessed in emerging markets following a

major natural resource discovery.

Week 1

Romer, Christina Christina Romer served as the former Chair of the Council on Economic

Advisors for the Obama Administration. She resigned from that role on

September 3, 2010.

Week 3, 7

Skill-BiasedTechnological

Change

As technology becomes more pervasive at all levels of society, workershave to update their skills to become more technologically savvy. For

example, cars today are equipped with high tech microprocessors, which

an autoworker would need to understand. Both high skilled and low

skilled workers need to update these skills. 80% of the income disparity

comes from the gap between those who can master these new skills and

those who can’t, because they don’t have the opportunity to do so.

Week 3, 7

Social Security A social welfare and insurance program, started in 1935, that pays

benefits to a retired worker. Throughout a worker’s career, the Social

Week 7






18


Security Administration keeps track of his or her earnings. The amount of

the monthly benefit to which the worker is entitled depends upon that

earnings record and upon the age at which the retiree chooses to beginreceiving benefits.

Stolper-

Samuelson

Theorem

Based on the Heckscher-Ohlin trade theory, the Stolper-Samuelson

theorem describes a relationship between relative prices of output goods

and relative factor rewards. The Stolper-Samuelson Theorem states that a

rise in the relative price of a good will lead to a rise in the return to that

factor which is used more intensively in the production of the good.

Conversely, this will result to a fall in the return to the other scarce factor.

The Stopler-Samuelson Theorem splits a country into clear winners and

losers.

Week 3

Sunrise Industries A colloquial term for a sector or business that is in its infancy, but is

growing at a rapid pace. A sunrise industry is typically characterized by

high growth rates, numerous start-ups and an abundance of venture

capital funding. Sunrise industries generally have plenty of "buzz"

surrounding them as public awareness about the sector increases and

investors get attracted to its long-term growth prospects.

Week 4

Sunset Industries A colloquial term for a sector or business that is decline, one that has

passed its peak or boom periods. For example, analogue recording

technologies for audio or video have been supplanted by digital

equivalents; although analogue equipment is still offered, sales have

declined dramatically and are not expected to recover.

Week 4

Supply and

Demand

In microeconomics, supply and demand is an economic model of price

determination in a market. It concludes that in a competitive market, the

unit price for a particular good will vary until it settles at a point wherethe quantity demanded by consumers (at current price) will equal the

quantity supplied by producers (at current price), resulting in an

economic equilibrium for price and quantity.

Week 1, 2

Supply Chains The network created amongst different companies producing, handling

and/or distributing a specific product. Specifically, the supply chain

encompasses the steps it takes to get a good or service from the supplier

to the customer. Supply chain management is a crucial process for many

companies, and many companies strive to have the most optimized

supply chain because it usually translates to lower costs for the company.

Week 2

Sweatshops A working environment that is considered to be unacceptably difficult or

dangerous. These types of conditions could include long working hours,low pay, and potential violation of labor laws.

Week 1

Trade Adjustment

Assistance

A federal program of the US government to act as a way to reduce the

damaging impact of imports felt by certain sectors of the U.S. economy.

The current structure features four components of Trade Adjustment

Assistance: for Workers, Firms, Farmers, and Communities.

Week 7

Trade Deficit An economic measure of a negative balance of trade in which a country's

imports exceeds its exports. A trade deficit represents an outflow of

Week 4






19


domestic currency to foreign markets.

Trade Surplus An economic measure of a positive balance of trade, where a country'sexports exceeds its imports. A trade surplus represents a net inflow of

domestic currency from foreign markets, and is the opposite of a trade

deficit, which would represent a net outflow.

Week 4

Trans-Pacific

Partnership

The Trans-Pacific Partnership is a proposed free trade agreement under

negotiation by Australia, Brunei, Chile, Canada, Malaysia, Mexico, New

Zealand, Peru, Singapore, the US, and Vietnam. Japan has expressed its

desire to become a negotiating partner. It is intended to be a high-

standard agreement specifically aimed at emerging trade issues in the

21st century. The secrecy of the negotiations has become a point of

controversy.

Week 3

Unfair TradePractices

Any fraudulent, deceiving, or dishonest practice in international tradethat is prohibited by law or regulation.

Week 4

Value Added Tax A form of consumption tax. From the perspective of the buyer, it is a tax

on the purchase price. For that of the seller, it is a tax only on the value

added to a product, material, or service, from an accounting point of

view, by this stage of its manufacture of distribution. The manufacturer

remits to the government the difference between these two amounts,

and retains the rest for themselves to offset the taxes they had previously

pad on the inputs.

Week 7

Value-Added The amount by which the value of an article is increased at each stage of

its production, exclusive of initial costs.

Week 4

Wage Insurance An insurance program to incentivize people to find new jobs, after losing

a job. A wage insurance program accounts for a fraction of the difference

in wage between the old job and the new one. This program incentivizes

people to go out and find new jobs even if they might pay a little less.

There would be limits and time constraints on this insurance program,

but it can combat the stasis in taking a new job after getting laid off.

Week 7

Wealth Tax A tax based on the accumulated stock of purchasing power, in contrast to

income tax, which is a tax on the flow of assets.

Week 7

Workers' Training

Fund Tax

A tax used to fund worker training programs. To fund the program

employers would be required to pay into a common fund or receive a tax

credit for training their own workers.

Week 3

Youth

Unemployment

A lack of job opportunities for younger workers (typically between the

ages of 15 and 24). Without these jobs, there is very little education and

on-the job training for new additions to the workforce.

Week 1

Edx Courses. Definition of Terms

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