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Degree of globalisation varies by country and can be measured using indicators and indices (AT Kearney index, KOF index).

Indicators - measure an individual aspect of globalisation (eg: the number of McDonald's in a country).

Indices - express indicators as percentages and proportions, which can then be used to form an index.

These two concepts are used to form two indexes, the AT Kearney and the KOF, which are used to assess the degree of globalisation in different countries.

AT Kearney

Published annually by the AT Kearney management consulting firm in partnership with Carnegie Endowment for International Peace's 'Foreign Policy' magazine. It is a composite index made up of 12 indicators. These are split up into 4 categories:

  • Economic integration (3 indicators) - measuring trade flows, FDI flows, etc.

  • Technological connectivity (3 indicators) - measuring number of internet users, amount of capital, etc.

  • Political engagement (3 indicators) - measuring membership of IGO's, number of peace treaties, etc.

  • Personal contact (3 indicators) - measuring international travel and tourism, number of international phone calls, etc.

Index values are calculated for each indicator based on rank relative to other countries, and are given a value between 1 and 0. The FDI and internet usage indicators are given a x2 weighting. It has been calculated since just 2008 and for only 62 countries (but these constitute 84% of global population and 96% of GDP). Small European countries top the list as they have smaller distances to connect people, and have a smaller domestic market, so figures are proportioned to their relative economic size, making their rankings better. The USA and Canada are in the top 10 as heavy weighting is given to ICT connectivity indicators, making up for losses over lower political engagement indicators.

KOF Index

Published annually by the Swiss Institute for Business Cycle Research, it is a composite index made up of 43 indicators. These are split up into 3 categories:

  • Economic Globalisation (15 indicators) - measuring FDI flows, tariff rates, trade in goods and services, etc.

  • Social Globalisation (22 indicators) - measuring tourist flows, number of TV owners, international phone calls, number of McDonald's and IKEA stores, gender parity, human capital, etc.

  • Political Globalisation (6 indicators) - measuring number of international NGO's a country has, number of foreign embassies, cohesion of trade agreements with other countries, etc.

Each indicator is given an index value which is weighted. Economic indicators are weighted to form 50% of the data, and social indicators are given a 33.33% weighting. Economic indicators are weighted higher as this has been where most globalisation growth has occurred over time. It has been calculated since 1970 including 158 countries up until 2006. In 2022, the rankings included 203 countries.

Typically HIC's top the list and LIC's are ranked lower. In 2022 Switzerland was ranked 1st (potentially biased??) and the Netherlands came 2nd; also cool to know that the UK was 5th. USA came 24th and the BRICS came even lower, most likely because their large land area means that many parts within the country aren't well connected, and so aren't very globalised (eg: rural China). Small European countries top the list as they have smaller distances to connect people, and have a smaller domestic market, so economic indicators are proportioned to their relative economic size, making their rankings better. This trend could also be down to the functions of the EU, ie creating a single market increases trade.

Whilst the index is highly regarded, there are some problems with it. Some indicators may be biased in choice and weighting (eg: the number of McDonald's and IKEA stores, and such high economic weightings). Also, the lack of data for a lot of countries reduces accuracy, as figures are assumed by interpolation. Also, with more indicators, accuracy would improve. Generally, because of the better access to data on more countries and the use of more indicators to make the index, the KOF index is regarded as more reliable than the AT Kearney index.

To help revise this, click the button for my condensed flashcards!

EXAM TIP: This hasn't yet come up in an exam question for paper 1 or 2, so it would be a good idea to anticipate it coming up and revise it thoroughly!

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