A New Index of Globalization: Measuring Impacts of Integration on Economic Growth and Income Inequality

Hyeon-seung Huh and Cyn-Young Park ()

No 587, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The purpose of this study is twofold. The first is to develop a new composite index of globalization based on data on 158 economies over the period 2006–2014. The second intention is to use the new index to evaluate empirically the possible effects of globalization on economic growth and income inequality. The index comprises 25 indicators that represent the key socioeconomic components of global integration. Principal component analysis is used to weight each component and construct an aggregate measure. Unlike previous composite indexes, this study separates the contributions of intraregional and extraregional integration in the construction of the globalization index. The results show that although globalization promotes economic growth, it may worsen income inequality. High-income countries benefit most in that the positive effect of globalization on economic growth is strongest among them than on other income groups, and they experience a less pronounced widening of income inequality. Between the two drivers of global economic integration, intraregional integration is far more important than extraregional integration. The analysis also finds extraregional integration to be mainly responsible for the rise in income inequality that has accompanied globalization.

Keywords: composite index; economic globalization; economic growth; extraregional integration; income inequality; intraregional integration (search for similar items in EconPapers)
JEL-codes: F10 F40 I30 O10 O50 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2019-07-19
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (8)

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Journal Article: A new index of globalisation: Measuring impacts of integration on economic growth and income inequality (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0587

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