FIW Working Papers | 2010-02
How to Measure Globalisation? A New Globalisation Index (NGI)
In this article, a new composite globalisation index will be presented. With its 21 variables, it accounts for the multidimensionality of this phenomenon instead of relying purely on economic indicators. As compared to other existing globalisation indices, three major innovations are introduced in this New Globalisation Index (NGI). Firstly, five variables that have until now not been used in globalisation indices enter the calculations. Secondly, geographical distances between countries are incorporated into the index in the trade variable, so as to account for the distinction between globalisation and regional integration. A final innovation is a methodological one, which concerns the use of a statistical method (principal component analysis) to form subindices according to the statistical features of the variable structure. A control for country size is employed for significantly affected variables, as was done in some other globalisation indices before. The final index contains 70 countries and covers a period between 1995 and 2005.