Economics of Globalization: A Transaction Cost Perspective


Course Content

Globalization is an important source of welfare, but at the same time
heavily contested in modern societies. This course elaborates on the
costs and benefits of globalization introducing modern non-mainstream
theories that at points challenge the traditional wisdom regarding the
benefits of globalization and helps to understand the prevailing
sentiments against globalization. We will heavily rely on insights from
transaction cost theory which challenges the neglect in traditional
neoclassical theory of transaction costs. The (oftentimes implicit)
reliance in mainstream trade theory on frictionless trade is surprising
for theories in which exchange is at the heart of the matter. This
course aims to familiarize you with the concept of transaction costs and
to show the relevance of transaction costs for understanding several of
the empirical phenomena that are impossible to understand without
relying on such costs.

Insights are particularly relevant to appreciate current discussions on
the impact of globalization on a small open economy such as the
Netherlands. Think, for example, about recent discussions on reshoring
and the impact of globalization on wage inequality and unemployment. The
course will focus on four main areas of research in which transaction
costs are dominant, viz. (i) international trade with a focus on the
multiple dimensions of transaction costs distinguishing between
transport costs, institutional costs and cultural costs of exchange,
(ii) foreign direct investments with a focus on outsourcing and the
organization of the firm in a globalizing world, (iii) industrial
organization with a focus on the determinants of the boundaries of the
firm, and (iv) networks with a focus on the role of social and regional
networks, and on standards as institutionalized settings that facilitate
exchange of goods, ideas, etc.

Teaching Methods

Six weekly interactive lectures of 3-4 hours in the early evening.

Method of Assessment

Individual paper and presentation and optional assignments.


An extensive reading list is made available at the start of the course.

Target Audience

Second and third year participants in the honours program.

Custom Course Registration

SBE rules and dates apply for this SBE HP course. Registration via VUnet.

Recommended background knowledge

Basic familiarity with the principles of economics and statistics.

General Information

Course Code E_HP1_EGTC
Credits 6 EC
Period P4
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator prof. dr. H.L.F. de Groot
Examiner prof. dr. H.L.F. de Groot
Teaching Staff prof. dr. H.L.F. de Groot

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Lecture
Target audiences

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