Measuring Globalisation

A New Globalisation Index (NGI)

Petra Vujakovic

Joint Vienna Insitutute

Introduction

Why measure globalisation?

Defining Globalisation Varied discussions in literature, no clear and

commonly accepted definition.

The process of growing interdependence of economies, societies and nations across large distances.

Globalisation Indices - Overview G-Index (World Markets Research Centre) A.T. Kearney / Foreign Policy Globalization

Index KOF Globalization Index (ETH Zürich) GlobalIndex (Transeurope-Project) CSGR Globalisation Index (Warwick University) Maastricht Globalization Index (Universiteit

Maastricht)

Innovations in the NGI 5 new variables

Introduction of distances International trade in goods weighted with geographical

distances globalisation vs. regional integration

Dimensions of globalisation generated through a statistical process Search for indicators based on a priori defined theoretical

spheres of globalisation Grouping the indicators together with help of PCA – new

dimensions or a confirmation of the theoretical ones?

Methodology

Innovations in the NGI 5 new variables

Introduction of distances

Dimensions of globalisation generated through a statistical process (PCA)

5 New Indicators Portfolio stock Trademark applications by non-residents Patent applications by non-residents Outgoing students International environmental agreements

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21 variables in NGI Hard data Output data

Countries: 70 Years: 1995-2005

Innovations in the NGI 5 new variables

Introduction of geographical distances

Dimensions of globalisation generated through a statistical process (PCA)

Geographical Distances

EU regional trade

Innovations in the NGI 5 new variables

Introduction of geographical distances

Dimensions of globalisation generated through a statistical process (PCA)

Building of the Dimensions (PCA) (1)

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Building the Dimensions (PCA) Extraction of 3 factors After rotation, individual variables load largely

to one of the 3 factors

(1) FINANCE (2) TRADE & POLITICS (3) SOCIAL

FDI stock trade in goods trade in services

FDI flow trademarks migration

portfolio stock patents tourism

portfolio flow transfers telephone

income payments env. agreements books

internet int. organizations newspapers

embassies outgoing students

peacekeeping

Results

Top 10 (1) Year 2005

RANK COUNTRY

1 Ireland

2 Switzerland

3 Netherlands

4 Belgium

5 Malta

6 Cyprus

7 Iceland

8 United Kingdom

9 Austria

10 Sweden

Small countries still in the top

Exclusively european „club“ 6 old EU countries new EU (Malta, Cyprus) EEA: Iceland +

Switzerland

Top 10 (2)

COUNTRY Rank

FIN

TRADE POL

SOC

Ireland 1 2 39 2

Switzerland 2 3 14 5

Netherlands 3 1 9 20

Belgium 4 5 2 10

Malta 5 6 29 4

Cyprus 6 14 56 1

Iceland 7 4 47 13United Kingdom 8 9 4 19

Austria 9 12 16 6

Sweden 10 7 13 17

Financial positions correlate highly with the final results All in top 15

Developed EU Top 20 in all 3

subindices „newer“ and non-EU

have lower rankings in trade/pol subindex Ireland, Malta, Cyprus

and Iceland not in top 20

High positions due to financial flows and social interconnectedness

Year 2005

Contributions of individual dimensions differ across countries

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Comparison of NGI with KOF Index results

Top 10 6 same countries in top 10

Island countries move forward - Malta, Cyprus, Iceland and UK

Islands have no direct neighbours

New variables show international integration (Trademarks, Patents, Environmental Agreements)

20

Country NGI KOF Difference

Ireland 1 7 6Switzerland 2 3 1Netherlands 3 4 1Belgium 4 1 -3Malta 5 22 17Cyprus 6 16 10Iceland 7 32 25United Kingdom 8 24 16Austria 9 2 -7Sweden 10 6 -4

Big Developed Countries

No significant changes

UK upwards – politics and financial stocks

Spain and Japan downwards – „restrictions“ variable, double counting

Low ranking of Japan – social indicators very low

21

Country NGI KOF Abweichung

United Kingdom 8 24 16Canada 12 8 -4France 15 12 -3Germany 17 20 3New Zealand 21 18 -3Spain 22 14 -8Australia 23 26 3Italy 27 25 -2USA 32 35 3Japan 59 50 -9

New EuropeGenerally lower positions than in KOF Index

smaller countries corrected for country size

lower scores in international financial stocks and new variables

22

Country NGI KOF Difference

Malta 5 22 17

Cyprus 6 16 10

Estonia 14 13 -1

Slovakia 16 21 5Czech Rep. 28 9 -19

Hungary 29 11 -18

Bulgaria 36 36 0

Poland 38 27 -11

Slovenia 40 17 -23

Latvia 47 34 -13

Lithuania 60 28 -32

Rumania 64 37 -27

BRIC‘s Generally better positions than in KOF Index

Asian giants move strongly upwards

Bigger countries corrected for country size

Distant trading partners

23

Country NGI KOF Difference

China 42 63 21

Russia 46 48 2

India 52 68 16

Brazil 63 57 -6

Main issues and Possible Applications of the Index

Thank you for your attention!