Metrics capturing the degree to which individual economies are globalized

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We discuss metrics of globalization for individual economies as distance measures between fully integrated and trade restricted equilibria in economies initially operating under less than full integration with the global economy. Such metrics can be used to construct country globalization metrics reflecting the distance of economies from full global integration due to trade barriers, barriers to factor flows, barriers to international financial intermediation, solved technological diffusion and other economy-specific features yielding less than full integration into the global economy. Many distance metrics present themselves and none are wholly satisfactory since they each behave differently across various displacements from integration. Distance measures can, for instance, be small in goods space but large in price space. We present alternative measures constructed for eight OECD economies and comment in a concluding section on other measures used elsewhere in the literature such as trade/GDP ratios.

Keywords: F11; F15; F41; equilibria; factor flows; globalization; trade

Document Type: Research Article


Affiliations: 1: Department of Economics, Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa, 52242-1000, USA 2: Department of Economics, Faculty of Social Science, University of Western Ontario, London, Ontario, N6A5C2, Canada 3: China Financial Policy Research Center, Renmin University of China, Beijing, 100872, P.R.China

Publication date: December 1, 2013

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