Petra Vujakovic Joint Vienna Insitutute Measuring Globalisation A

Petra Vujakovic Joint Vienna Insitutute Measuring Globalisation A New Globalisation Index (NGI)

Introduction

Why measure globalisation? Quantify a very contended phenomenon and allow objective quantitative analysis Identify/quantify sources and impacts Analysis and deeper understanding of the process Analysis over time and across regions Investigate links to other indicators – poverty, inequality, growth… � „If you can not measure it, you can not improve it. “ Lord Kelvin

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) Global. Index (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 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 ------------------------------------ 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 Bilateral trade in goods data ($/GDP) weighted with geographical distance between countries (CEPII database) COUNTRY BEFORE AFTER Example movements in rankings: EU regional trade Downward Stagnating Upward 32 42 Austria 20 54 Denmark 35 58 Turkey 44 46 Russia 49 48 UK 58 57 India 65 35 Japan 68 53 USA 70 56 Germany

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) Extraction of factors with maximal variance Individual factors independent The principal components are linear combination of original data Variables load to different factors, following the correlation structure of the variable set . . . 13

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) Year 2005 COUNTRY Financial positions correlate highly with the final results Ran k 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 13 „newer“ and non-EU have lower rankings in trade/pol subindex United Kingdom 8 9 4 19 Austria 9 12 16 6 Sweden 10 7 13 17 All in top 15 Developed EU Top 20 in all 3 subindices Ireland, Malta, Cyprus and Iceland not in top 20 High positions due to financial flows and social interconnectedness

Contributions of individual dimensions differ across countries 120% 100% 80% 60% social trade & politics 40% finance 20% 18 R ep ub lic Sl ov en ia di a In va k Sl o hi na at e St te d C s y an ni U G er m nd s la he r N et Ire la nd 0%

Comparison of NGI with KOF Index results

Top 10 Country NGI KOF Difference 6 same countries in top 10 q Ireland 1 7 6 Switzerland 2 3 1 Netherlands 3 4 1 Belgium 4 1 -3 Island countries move forward Malta, Cyprus, Iceland UK Malta 5 22 17 q Cyprus 6 16 10 Iceland 7 32 25 United Kingdom 8 24 16 Austria 9 2 -7 Sweden 10 6 -4 20 q Islands have no direct neighbours New variables show international integration (Trademarks, Patents, Environmental Agreements) q

Big Developed Countries Country NGI KOF Abweichun g United Kingdom 8 24 16 Canada 12 8 -4 France 15 12 -3 Germany 17 20 3 New Zealand 21 18 -3 Spain 22 14 -8 Australia 23 26 3 Italy 27 25 -2 USA 32 35 3 Japan 59 50 -9 21 No significant changes q UK upwards – politics and financial stocks q Spain and Japan downwards – „restrictions“ variable, double counting q Low ranking of Japan – social indicators very low q

New Europe Country NGI KOF Difference Malta 5 22 17 Cyprus 6 16 10 Estonia 14 13 -1 Slovakia 16 21 5 Czech 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 22 q. Generally lower positions than in KOF Index smaller countries corrected for country size q lower scores in international financial stocks and new variables q

BRIC‘s Country NGI KOF Difference China 42 63 21 Russia 46 48 2 India 52 68 16 Brazil 63 57 -6 Generally better positions than in KOF Index q Asian giants move strongly upwards q q. Bigger countries corrected for country size q. Distant partners 23 trading

Main issues and Possible Applications of the Index New Globalisation Index (NGI) introduces some new perspectives to the measurement of globalisation Important issue: globalisation vs regional integration Geographical distances prove to be an important aspect in quantifying globalisation Intra-EU relations bias the results towards the EU countries Lack of bilateral data is a constraint for many variables Globalisation IS a multidimensional phenomenon ------------------------------------ Links to other indicators: Development, economic growth, inequality?

Thank you for your attention!