3.3A: Measuring the Degree of Globalisation

• Indicator

  A measure of an individual aspect (of globalisation), e.g. the amount of FDI.

  Indices express indicators as a percentage - either of the highest actual total or of the maximum possible total.They may be expresses as whole numbers out of a maximum 100, or as a decimal fraction (in 1/100ths) out of a maximum 1.0.
• KOF Index of Globalisation

  • Produced annually by the Swiss Institute for Business Cycle Research
  • KOF = konjunkturforschungsstelle
• How is economic globalisation measured using the KOF Index?

  Measured by indicators like cross-border trade, FDI, tariff rates and money flows.
• How is social globalisation measured using the KOF Index?

  Measured by international telephone calls, tourist flows, resident foreign population and access to foreign internet, households with a TV set, and 'global affinity' (presence of international TNC retail outlets), international mail, import and exports of books.
• How is political globalisation measured using the KOF Index?

  Measured by: foreign embassies in a country, membership of international organisations, number of UN Peacekeeping missions participated in, trade and other agreements with foreign countries.
• KOF Index statistics

  • Scaled average calculated to give a separate index value for each country.
  • Mean of three category indices calculated to give the overall globalisation index.
  • 2015's data is available for 207 countries.
  • Index calculated since 1970 (158 countries 1970-2006)
  • This allows comparisons over time.
  • Economic globalisation has risen faster than political or social since 1970.
• Why do small European countries top the KOF Index?

  • The USA and BRICs have lower index values because the KOF index measures international interactions - internal flows between diverse regions in large countries are not recorded. Large parts of the inner USA are not well connected to the rest of the world.
  • Small countries have short distances to neighbouring countries, fewer domestic attractions and a smaller domestic market.
  • High European indicator value reflects the very large interactions within the EU. Suggests the decision to join a trade bloc effective in promoting globalisation.
• Disadvantages of the KOF Index?

  • Technological developments mean that some indicators look dated, e.g. international mail, given the rise of email and social media.
  • Trade flows will not include informal economy flows. Understates degree of globalisation in developing and emerging countries.
  • Choice and weighting of indicators is value of judgement, and may contain cultural bias (e.g. no. of McDonald's restaurants)
  • Fewer missing or estimated data is increasing accuracy and comparability.
  • Large number of indicators incorporates wide range of international connections.
• AT Kearney index of globalisation

  • Produced annually by the AT Kearney management consulting firm in conjunction with Carnegie Endowment for International Peace's 'Foreign Policy' magazine.
  • Index value calculated for each indicator based on its relative position on the scale - with the highest actual value scoring 1.0 and the lowest 0.
  • Overall index value calculated.
  • FDI, internet usage and international traffic telephone weighted double.
• Indicators of globalisation using the AT Kearney index

  • Economic integration
  • Trade and FDI flows
  • Technological connectivity
  • Number of internet users, internet hosts and secure servers.
  • Political engagement
  • Membership of international organisations and treaties, contribution to UN peacekeeping, level of governmental transfers (e.g. aid)
  • Personal contact
  • International travel and tourism, international telephone traffic, personal cross border financial transfers (e.g. remittances)
• Disadvantages of the AT Kearney index

  • Only includes 62 countries, though these include 84% of the world's population and 96% of global GDP.
  • First published in 2008.
  • Small European countries dominate the top 20, though the USA is 4th and Canada is 6th. Smaller countries have higher FDI indicators due to small domestic markets.
  • Heavy weighting given to ICT connectivity enables the USA to gain a high index score despite low political engagement in terms of treaties signed.