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

2. Introduction

3. 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

4. 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.

5. 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)

6. 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?

7. Methodology

8. Innovations in the NGI 5 new variables Introduction of distances
Dimensions of globalisation generated through a statistical process (PCA)

9. 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:

10. Innovations in the NGI 5 new variables
Introduction of geographical distances
Dimensions of globalisation generated through a statistical process (PCA)

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

12. Innovations in the NGI 5 new variables
Introduction of geographical distances
Dimensions of globalisation generated through a statistical process (PCA)

13. 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
...

14. 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

15. Results

16. Top 10 (1) Year 2005 Small countries still in the top
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

17. Top 10 (2)
Year 2005
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
COUNTRY
Rank
FIN
TRADE POL
SOC
Ireland 1 2 39
Switzerland 3 14 5
Netherlands 9 20
Belgium 4 10
Malta 6 29
Cyprus 56
Iceland 7 47 13
United Kingdom 8 19
Austria 12 16
Sweden 17

18. Contributions of individual dimensions differ across countries

19. Comparison of NGI with KOF Index results

20. 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)
Country
NGI
KOF
Difference
Ireland 1 7 6
Switzerland 2 3
Netherlands 4
Belgium -3
Malta 5 22 17
Cyprus 16 10
Iceland 32 25
United Kingdom 8 24
Austria 9 -7
Sweden -4

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

22. New Europe Generally lower positions than in KOF Index
Country
NGI
KOF
Difference
Malta 5 22 17
Cyprus 6 16 10
Estonia 14 13 -1
Slovakia 21
Czech Rep. 28 9
-19
Hungary 29 11
-18
Bulgaria 36
Poland 38 27
-11
Slovenia 40
-23
Latvia 47 34
-13
Lithuania 60
-32
Rumania 64 37
-27
Generally lower positions than in KOF Index
smaller countries corrected for country size
lower scores in international financial stocks and new variables

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

24. 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?

25. Thank you for your attention!