Spillover Effect

The spillover effect is the domino effect you never expected. You didn’t know that burrito would give you food poisoning, causing you to miss that job interview. Or that meeting your dog’s dog-friend’s owner would lead to you getting your next job.

The spillover effect is like that, but with big-picture economics as opposed to personal economics.

It’s when an event happens that results in an unexpected economic consequence on a large scale…”spilling over” into other areas. Negative externalities are oftentimes spillover effects. For instance, a firm that's polluting...leading to higher healthcare costs and cancer rates nearby.

On a larger scale, things that happen with the U.S.’s economy oftentimes have a spillover effect to other areas of the world. Which is why everyone knows about America, but Americans don’t know about everyone else. Except China. We know about China.

Since China is now the second largest economy after America, it too is having spillover effects onto other nations’ economies. China’s economy was growing like crazy, but has recently slowed. This means they’re buying less from other countries, and that effect is rippling through all of those economies.

For instance, take the U.S. and China trade war. While this obviously affects the U.S. and China (since tariffs suck for both sides, putting a damper on GDP), it also affects other nations that trade with the U.S. and China. Since the world is so globally connected nowadays, domino effects are increasingly common. When the dominos continue to fall, affecting outside parties, you have a spillover effect.

Countries like North Korea are pretty immune to spillover effects, since they’re pretty independent of the international economy. Welp, that’s one thing going for their economy.