Measuring Globalization
Globalization means different things to different peoples. To its opponents it invokes images of a greedy imperialistic America and its minions spreading the depredatory capitalistic model to every corner of the globe. To its propoents it can mean the extension- not always without local adaption- of the economic, social, technological, and legal arrangements with the goal of increasing "interdependency and interaction" among nations and state actors.
For sober-minded social scientists interested in studying the origins or impacts of "globalization" the first order of the day is to define and operationalize the term. This is, however, often much easier said than done. A recent paper in Global Economy Journal by Almas Heshmati, a paper entitled "Measurement of a Multidimensional Index of Globalization", makes valuable headway. Here's the abstract: 
In this article we present two composite indices of globalization. The first is based on the Kearney/Foreign Policy magazine and the second is obtained from principal component analysis. They indicate which countries have become most global and show how globalization has developed over time. The indices are composed of four components: economic integration, personal contact, technology and political engagement, each generated from a number of variables. A breakdown of the index into major components provides possibilities to identify sources of globalization and associate it with economic policy measures. The empirical results show that a low rank in the globalization process is due to political and personal factors with limited possibility for the developing countries to affect. The high ranked developed countries share similar patterns in distribution of various components.
Among the paper's important contributions is its empirical analysis of perhaps the most widely-used measure of globalization, one developed by management consultants AT Kearney. The express purpose of the paper is "to investigate the usefulness of the recently created database by Kearney in the development of an index of globalization." The author further notes this potential contribution for his research:
Creation of a comprehensive globalization database and construction of a globalization index that is multidimensional and decomposable is an important issue. Such an index will be useful tool in quantification of the extent and evaluation of the impacts of globalization.
Commentary
Globalization is not my research area. And although, I had very few priors on how I thought the construct ought to be measured, I was somewhat surprised at how Kearney operationalized it. According to Heshmati:
Kearney (2002, 2003) is the first attempt to construct a database and to compute a composite globalization index. The index is a simple combination of forces driving the integration of ideas, people, and economies, worldwide. It is composed of four major components: economic integration, personal contact, internet technology, and political engagement, each being generated from a number of determinant variables. The total number of variables used in the computation of the globalization index is 13.
As for the specifics of the 13 variables:
The index quantifies economic integration by combining data on four key variables, namely trade, foreign direct investment, portfolio capital flows, and income payments and receipts. It gauges technological connection by accounting for internet users, internet hosts, and secure servers. The index assesses political engagement by taking stock of the number of international organizations and UN Security Council missions in which each country participates and the number of foreign embassies that each country hosts. Personal contact is charted by looking at international travel and tourism, international telephone traffic, and across borders money transfers.
One thing that surprised me was that, by my recollection at least, work by social scientists takes some of these measures as determinants of one another. This is by no means an uncommon problem and one that can probably be corrected by future research. A second problem with the measure is its over-reliance on internet-related factors as the measure of "technological connection." Several other indicators could be included here. For a start, they could use patent- and/or science-based indicators based on the size of the foreign patent stock or the number of co-authored articles appearing in peer-reviewed scientific journals.
Tags: globalization | Economics | Business |