Question

The KOF Index of Globalization, provided by the KOF Swiss Economic Institute, measures globalization on economic, social, and political dimensions. Provide a brief analysis (not a description) of this index and its ranking using concepts from the text readings and no less than one additional source. Specifically, how do factors considered in calculating the index reflect globalization? Why do you agree (or disagree) with this calculation? Find the most recent ranking and identify the 5 countries with the lowest and highest Globalization Index. What are the trends or similarities among the countries listed at the top and bottom?

Answer 1

Solution:-

KOF Index of Globalization published by KOF Swiss Economic Institute is a globalization index introduced in 2002. The index is a measure of three important dimensions of globalization : Economic, Social, and Political. It uses the three main dimensions of globalization the Economic Globalization, the Social Globalization and the Political Globalization to produce an index. The 2016 Globalization Index ranks Netherlands at the top while the Channel Islands is placed at 207th position. The index is calculated as sub-indices as -

1. Economic Globalization (Actual Flows,Restrictions)

The Economic Globalization includes Actual Flows and restrictions. Actual Flows is a sub-index which calculates the actual economic flow in a country. It uses data on trade, FDI, and portfolio investment.

The Restriction is the second sub-index which measures the restrictions on trade and capital that country's impose as tariffs, barriers, and taxes.

2. Social Globalization (Data on Personal Contact, Data on Information Flows, Data on Cultural Proximity)

The Social Index as three categories - Personal Contacts , Information Flows and Cultural Proximity

The Personal Contacts measures the direct interaction between people of different countries.

The Information Flows measure the interaction between people of different countries in form of ideas and images.

The Cultural Proximity measure the closeness between people of different countries on a cultural basis. It is the most difficult concept to measure. The cultural proximity is measured by the number of Macdonalds, the number of Ikea and the trade in books.

3. Political Globalization

The Political Globalization is measured by the number of embassies in the country. It also takes into account the number of Internation Organization that the country has a membership.

All these sub-indices are then transformed into one index on a measure of 100 to produce the results.

The five countries with highest Globalization index are -
1. Netherland
2. Ireland
3. Belgium
4. Austria
5. Switzerland
The similarities among these countries are that most of these countries are in Europe which means that Europe has most globalized economy and people.

The five countries with lowest Globalization index are -
1. Faeroe Islands
2. Puerto Rico
3. French Polynesia
4. Greenland
5. Guam

The lowest Globalization Index countries are mostly Islands. Islands fair poorly on globalization index because of low economic activity and interaction among other countries because of geographic location.