The Irish Times and other media today carried a report on the publication of a new globalisation index produced by Ernst & Young which places Ireland third on the globalised states list. The EY index joins an increasingly crowded field, so what follows is a bluffer’s guide to globalisation indices. As always, a good starting point (but never more than that) is the relevant Wikipedia entry.
There are now four globalisation indices with some claim to respectability.
The A.T. Kearney/ Foreign Policy globalisation index. Although the methodology is available from the A.T. Kearney website, the detailed results themselves were published in the Nov/Dec issue of Foreign Policy each year which generally requires subscription access (university or other library, although reports up to 2005 are available on the Kearney website). This seems to have been first into the field, initially launched in 2001. However, the last update in 2007 presented data for 2006, and in 2008 the index was replaced in Foreign Policy by a Global Cities Index. The A.T.Kearney website says that the two are complementary, but the fact remains that the index has not been updated since 2006. Also, the data are made available only in pdf format so cannot be easily manipulated. The index covers 62-72 countries and tracks four dimensions of globalisation: economic integration, personal contacts, technological connectivity and political engagement. However, a major criticism of the index is that the weights are arbitrary (essentially equal weights for each indicator with heavier weightings for trade and investment “due to those factors’ particular importance in the ebb and flow of globalization”). Given the emergence of better-grounded competitors, this could explain its apparent demise (see the papers by Lockwood and Heshmati for critical reviews).
The KOF index of globalisation has a cool website with a great interactive interface. It is also a serious academic effort by Axel Dreher based at the KOF Swiss Economic Institute. It was devised in 2002 as a more comprehensive measure of globalisation than the A.T.Kearney/Foreign Policy measure. The 2007 index was just released last week, and the database now consists of data on a yearly basis for 208 countries over the period 1970 – 2007. It sets out to measure the economic, social and political dimensions of globalization, where the weights are 37%, 39% and 25%, respectively. Twenty four different indicators are used and the weights are derived from statistical (principal components) analysis. This is currently the brightest kid on the block.
Another academic contribution GlobalIndex comes from a bunch of sociologists linked in the TransEurope Research Network funded by the European Science Foundation, but which owes quite a lot to Dreher both in the choice of variables and the weighting methodology. Publication lags are obviously even longer in sociology than they are in economics, and the 2008 paper which introduces the index provides data from 1970 but only up to 2002 under four dimensions: economic globalization, socio-technical globalization, cultural globalization, and political globalization. The index consists of 31 variables for 116 countries with the weights determined by statistical methods and the data can be downloaded in various formats (excel, stata, spss).
Finally, Ernst & Young produced their index yesterday, although much of the hard slog in constructing the numbers has been done by the Economist Intelligence Unit. The EY index tracks the performance of 60 major countries according to 20 separate indicators that the EIU believes capture the key aspects of cross-border integration of business. The indicators fall into five broad categories: openness to trade; capital movements; exchange of technology and ideas; labor movements; and cultural integration. The innovative feature of the index is that these factors have been weighted (ranging from 17% to 22% for each) based on the significance placed upon each factor by 520 surveyed senior company executives doing international business. The performance of countries is measured over time, so that progress toward greater or lesser globalization since 1995 can be observed, with a forecast of likely performance until 2013. Unfortunately, the raw data do not seem to be publicly available in any form and the index data themselves cannot be easily downloaded.
The following table compares the rankings for Ireland for the latest year available for each index. There is a good deal of similarity, but it is noteworthy that on the KOF index which I would tend to see as the most robust, Ireland’s ranking falls to 11th place.
Globalisation rankings compared
Do these rankings matter? Those of us working in universities have learned to be more than a little sceptical of rankings, but there is always a certain egoistical interest to see where one’s own country is ranked. More important, at this point in history, there is some interest in whether globalisation is being rolled back or not, and indices can help to throw light on this. Wide use is also made of the indices to test hypotheses about the relationship between a country’s engagement with globalisation and various economic and social outcomes (see the papers cited on the KOF website). Globalization indices do not close the debate, but they can be helpful in sparking it.