How global is globalization?

Globalization has been determined to be an important factor for growth and development. We investigate to what extend countries are converging in their degree of globalization by performing times series beta and stochastic convergence tests on a recently developed globalization index initially develped by Axel Dreher (Dreher 2006, Does Globalization Affect Growth? Evidence from a new Index of Globalization, Applied Economics 38, 10: 1091-1110) covering 132 countries from 1970-2008. Data covers several areas including: actual economic flows; economic restrictions; data on information flows; data on personal contact; and data on cultural proximity.

We construct a relative globalization series for each country and perform trend regressions and unit root tests on the relative globalization series. By doing so, we are able to identify which individual countries are, or are not, converging to the world norm. We also break down the globalization index into its three separate components of economic, political, and social globalization.

We use a variety of unit root tests, including standard ADF and Phillips-Perron, both with and without a trend component. Preliminary results indicate 31 cases of beta convergence, and 12 cases of beta divergence. The rest of the countries are neither beta converging nor beta diverging. For economic globalization, 26 are beta converging and 8 beta diverging; for political globalization, 48 are beta converging and 6 beta diverging; for social globalization, 20 are beta converging and 11 beta diverging.

Finally, we will use these findings to determine the factors which are contributing to the globalization process. Data collection for this part of the project is still on-going.