Journal of Business and Policy Research
Vol. 7. No. 2. July Issue. Pp. 41 - 49
Impact of the Individual Dimensions of Globalization on
International Competitiveness in Regions
Hanna G. Adamkiewicz-Drwiłło* and Stanislaw Maciej Kot†
This paper examines the impact of the economic, social and political
dimensions of globalization on international competitiveness. The
statistical data regarding the KOF Globalization Index and World
Economic Forum Competitiveness Index concern 132 countries in
2008. The competitiveness of low-income countries is driven only by
the economic aspect of globalization. Social and political dimensions
influence the competitiveness of middle-income countries, whereas
only the social dimension is decisive in high-income countries. The
effects of globalization on international competitiveness are specific to
given geographic regions.
JEL Classification: F43
1. Introduction
Competitiveness is the set of institutions, policies, and factors that determine the
level of a country’s productivity (Sala-i-Martin et al. 2010). On the other hand,
economic development seems to be also influenced by globalization (Stiglitz,2002).,
Globalization is, however, a complex process consisting of social, political as well as
economic dimensions (Dreher, 2006). Hence, two interesting problems arise: how
these individual dimensions of globalization affect international competitiveness, and
whether the impact of globalization on international competitiveness depends on a
country’s economic development and geographical location. Searching for answers
to these questions is the aim of our paper.
Until now, these problems have not been analyzed. Recently, Salvatore (2010) has
examined the relationship between globalization, international competitiveness and
growth. However, he does not disaggregate globalization into its underlying
dimensions. Our paper offers a deeper insight onto this relationship.
The rest of this paper is organized as follows. Section 2 offers a literature review.
Section 3 discusses the methodological background, statistical data and a regression
model. Section 4 presents the empirical investigation results. Section 4 provides
general conclusions and political recommendations.
2. Literature Review
An extensive literature exists on the effects of globalization (see among others,
Stiglitz 2002, Bhagwati 2001, 2004, Friedman 2003, Gomory & Baumol 2004, 2004,
Tanzi 2004, Bauman 2000, Intrilligator 2004, Sala-i-Martin 2006). Salvatore (2009)
emphasizes that a great deal of controversy exists as to whether or not and, if so, to
*
. Hanna G. Adamkiewicz-Drwiłło, Department of Economics, Gdansk University of Technology, Poland.
Email: had@zie.pg.gda.pl.
†
Stanislaw Maciej Kot, Department of Economics, Gdansk University of Technology, Poland.
Email” skot@zie.pg.gda.pl. This author acknowledges the support of NCN grant N N111 295638
Adamkiewicz-Drwiłło & Maciej Kot
what extent globalization has increased international competitiveness. He finds
positive rank correlation between the KOF (2009) overall globalization index and the
IMD (2009) competitiveness index based on statistical data for 53 countries. He does
not consider, however, the impact of individual dimensions of globalization on
international competitiveness.
Dreher (2006) analyses whether the overall globalization index and subindices
measuring individual dimensions of globalization affect economic growth. He shows
that globalization indeed promotes growth. Actual economic flows and restrictions are
strongly related with growth in developed countries. Information flows also promote
growth whereas political integration has no effect. Salvatore (2010) argues that
competitiveness affects a country’s growth potential
In other studies some particular aspects of the relationship between globalization and
competitiveness are addressed. Ivanishvili-Orbelani (2009) analyses the impact of
globalization on national competitiveness in Georgia. Zhang (2010) addresses the
problem of how globalization affects industrial competitiveness. He finds that foreign
direct investment and international trade have a positive impact on industrial
competitiveness.
3. The Methodology and Model
The KOF (2009) index was used as a quantitative measure of globalization. This
index aggregates the following six individual dimensions of globalization: actual
flows, international trade and investment restrictions, personal contacts, information
flows, cultural proximity, and political globalization. The first two dimensions describe
economic globalization, whereas the next three social globalization. The weighted
sum of these indices forms the overall globalization index (OGI) (Dreher, Gaston &
Martens 2008).
International competitiveness is measured by the Global Competitiveness Index
(GCI), which defines the microeconomic and macroeconomic foundations of national
competitiveness (World Economic Forum). GCI is a weighted average of many
different components, each measuring a different aspect of competitiveness (Schwab
& Porter 2008).
The statistical data concerned 132 countries in 2008. This was the most current GCI
and OGI data available when this paper was written. However, a broader time period
will be taken into account in our further studies.
The regression models were built for six geographic regions and four economic
groups of countries, classified according to per capita GDP (WDI, 2010). We used
linear regression models where the global competitiveness index GCI was a
dependent variable and globalization dimensions were independent variables.
World Bank classifies economies according to GNI/capita (2009) as follows:
Low income economies:
$995 or less
Lower-middle income economies: $996 - $3,945
Upper-middle income economies: $3,946 – $12,195
High income economies:
$12,196 or more
42
Adamkiewicz-Drwiłło & Maciej Kot
All calculations presented in this paper were performed using the statistical package
STATISTICA. We assumed a 5% significance level when testing statistical
hypotheses.
4. Results
The scatter plot in Fig.1 displays
competitiveness and globalization.
the
relationship
between
international
Fig. 1. International competitiveness against globalization.
6.0
GCI-Global Competitiveness Index
5.5
5.0
4.5
4.0
3.5
3.0
2.5
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
OGI-Overall Globalization Index
We fitted linear regression function to empirical data. Eq. 1 shows the estimates of
the regression function parameters (standard errors in parentheses):
GCI = 1.73258 + 0.03831∙OGI
(0.14838) (0.00225)
(1)
R2 = 0.70319
The obtained result confirms our first hypothesis that globalization has a positive
effect on international competitiveness. This means that the more globalized the
country, the more competitive it is.
Table 1 presents the mean values of the OGI and GCI indices in the groups of
countries classified according to per capita GDP.
43
Adamkiewicz-Drwiłło & Maciej Kot
Table 1: Globalization (OGI), international competitiveness (GCI),
and GDP/capita in the World’s economies, 2008 (mean values).
*
Country group
Globalization Competitiveness GDP/capita
Low income
44.90
3.36
1226.61
Lower middle income
57.13
3.88
3946.61
Upper middle income
63.10
4.08
10622.61
High income
78.97
4.85
31941.46
All countries
64.31
4.19
15009.39
Note: OGI - Overall Globalization Index (0-100), GCI – Global Competitiveness Index (0-6)
*
$International 2005 prices, PPP adjusted (WDI 2010).
Source: Authors’ calculations using data from KOF (2009) and Schwab & Porter (2008).
The analysis of the results in Table 1 shows that the richer country, the higher the
levels of competitiveness and globalization.
Table 2 shows the distribution of globalization and competitiveness in geographic
regions. This Table also shows the GDP/capita mean of each region. The regions are
arranged with respect to their GDP/capita in ascending order.
Table 2: Globalization (OGI). international competitiveness (GCI),
and GDP/capita in geographic regions, 2008, (mean values)
*
Geographic Region
Globalization Competitiveness GDP/capita
South Asia
46.54
3.78
2324.87
Sub-Saharan Africa
48.22
3.53
2737.79
Latin America & Caribbean
60.43
3.94
9035.89
East Asia & Pacific
64.46
4.48
16273.24
Europe & Central Asia
75.77
4.50
22228.91
Middle East & North Africa
65.64
4.45
22726.61
North America
82.82
5.55
39572.70
All Regions
64.31
4.19
15009.39
Note: OGI - Overall Globalization Index (0-100), GCI – Global Competitiveness Index (0-6)
*
$International 2005 prices, PPP adjusted (WDI 2010).
Source: Authors’ calculations using data from KOF (2009) and Schwab & Porter (2008).
Table 2 reveals three main groups of regions which slightly differ with respect to the
advancement of the globalization process. The least advanced group comprises
South Asia and Sub-Saharan Africa. Latin America & Caribbean, East Asia & Pacific,
and Middle East & North Africa form the middle-advanced group of regions. Finally,
Europe & Central Asia as well as North America form the group of most advanced
regions.
The above classification of geographic regions concerning the advancement of
globalization does not correspond precisely to with the classification concerning
international competitiveness. In the latter classification, Sub-Saharan Africa, South
Asia, and Latin America & Caribbean are the least competitive regions. The Middle
East & North Africa, East Asia & Pacific, and Europe & Central Asia fall into the
medium range of competitiveness, while the USA and Canada, which form the North
American region, are the most competitive countries in the World.
The next two tables show the individual dimensions of globalization. These
dimensions play the role of explanatory variables in the regression models. Table 3
contains the globalization sub-index mean values in the World’s economies. Table 4
shows the mean values of these indices in geographical regions.
44
Adamkiewicz-Drwiłło & Maciej Kot
Table 3: Dimensions of globalization in the World’s economies, 2008
(mean values)
Lower
Upper
High
middle middle income
income income
Economic
44.77
57.83
65.65
81.35
Actual Flows
47.18
57.15
65.72
80.59
*
Restrictions
45.06
57.38
64.25
81.09
Social
27.09
42.62
53.04
76.66
Personal Contacts 28.28
35.35
51.18
77.04
Information Flows
44.90
64.09
74.68
86.93
Cultural Proximity
6.06
27.50
31.20
65.09
Political
71.47
74.19
75.65
78.89
OGI
44.90
57.13
63.10
78.97
Note: OGI - Overall Globalization Index (0-100)
*
International Trade and Investment Restrictions.
Source: Authors’ calculations using data from KOF (2009 ).
Dimensions
of globalization
Low
income
All
groups
65.71
66.48
65.40
54.77
52.97
71.69
38.32
75.77
64.31
Table 4: Globalization in geographic regions, 2008 (mean values)
Dimensions
of globalization
South
Asia
SubSaharan
Africa
Latin
East
America
Asia
&
&
Caribbean
Pacific
Economic
37.68
49.00
63.13
66.43
- Actual Flows
36.78
51.80
64.98
66.91
*
- Restrictions
41.37
47.82
63.25
66.79
Social
31.13
31.77
51.61
51.01
- Personal Contacts 25.81
33.07
47.43
44.07
- Information Flows
45.28
48.27
70.77
70.69
- Cultural Proximity
20.22
10.43
34.71
39.96
Political
81.78
72.38
68.14
74.68
OGI
46.54
48.22
60.43
64.46
Note: OGI - Overall Globalization Index (0-100)
*
International Trade and Investment Restrictions.
Source: Authors’ calculations using data from KOF (2009).
Europe &
Central
Asia
76.83
76.84
76.99
70.64
67.21
86.90
56.01
81.71
75.77
Middle
East &
North
Africa
67.11
69.42
69.86
56.94
68.17
73.74
33.50
70.95
65.64
North
America
73.70
67.34
80.06
83.91
73.55
88.01
90.36
94.12
82.82
Table 5 presents the regression parameter estimates for five World economy groups
in 2008 (standard errors in parentheses).
The following dimensions of globalization have a statistically significant impact on
international competitiveness: international trade and investment restrictions in lowincome countries; information flows and political dimensions in lower-middle income
countries; actual flows, cultural proximity, and political dimensions in upper-middle
income countries, and finally personal contacts, information flows, and cultural
proximity in high-income countries. It is worth noting that information flows have a
negative impact on international competitiveness in high-income countries.
The regression model estimates for geographic regions are presented in Table 6
(standard errors in parentheses). North America was put together with Europe &
Central Asia because the former region consists of two countries only (USA and
Canada).
45
Adamkiewicz-Drwiłło & Maciej Kot
Table 5: The impact of globalization on international competiveness in the
World’s economies, 2008
Dimensions
of globalization
Intercept
Low
Income
2.839285
(0.245039)
p=0.000000
Lower-middle
income
2.067923
(0.464728)
p=0.000117
Actual Flows
International Trade and
Investment Restrictions
Upper-middle
income
2.327742
(0.344822)
p=0.000000
0.014838
(0.003397)
p=0.000155
0.012140
(0.005320)
p=0.033567
Personal Contacts
Information Flows
0.012201
(0.005336)
p=0.029696
Cultural Proximity
Political
2
Adjusted R
MSE of estimation
High
income
4.315993
(0.592813)
p=0.000000
0.166932874
0.238085338
0.013829
(0.003419)
p=0.000355
0.005078
(0.002416)
p=0.044708
0.008101
(0.003056)
p=0.013061
0.352213109
0.311997521
0.478899402
0.236751897
0.012047
(0.005520)
p=0.034717
-0.014028
(0.006944)
p=0.049775
0.012958
(0.002510)
p=0.000006
0.364416189
0.385275235
Source: Authors’ calculations using data from KOF (2009) and Schwab & Porter (2008).
46
Adamkiewicz-Drwiłło & Maciej Kot
Table 6: The impact of globalization on international competiveness in
geographic regions, 2008
Dimensions
of
globalization
South Asia
SubSaharan
Africa
Intercept
0.717308
(1.132139)
p=0.571356
0.073927
(0.027236)
p=0.072896
2.341152
(0.219561)
p=0.000000
0.017874
(0.005151)
p=0.002073
International
Trade and
Investment
Restrictions
Personal
Contacts
Latin
America
&
Caribbean
1.125946
(0.457525)
p=0.022602
0.013012
(0.004008)
p=0.003864
East Asia &
Pacific
Middle East
& North
Africa
0.541241
(0.481577)
p=0.283039
3.358111
(0.216160)
p=0.000000
0.010215
(0.003698)
p=0.011083
Information
Flows
0.027993
(0.005047)
p=0.000017
0.015809
(0.003197)
p=0.000268
0.023348
(0.004214)
p=0.000002
-0.014112
(0.006513)
p=0.035832
0.011692
(0.001763)
p=0.000000
0.626187
0.233261
0.777919
0.309566
0.028590
(0.005124)
p=0.000120
Cultural
Proximity
Political
Adjusted R
MSE of
estimation
Europe &
Central Asia
& North
America
3.522194
(0.447876)
p=0.000000
0.026267
(0.004277)
p=0.000050
2
0.614185
0.244133
0.591630
0.255391
0.612144
0.224552
0.832011
0.296441
Source: Authors’ calculations using data from KOF (2009) and Schwab & Porter (2008).
An analysis of the results presented in Table 6 shows that international trade and
investment restrictions are crucial for international competitiveness in the three
poorest regions (South Asia, Sub-Saharan Africa, and Latin America & Caribbean).
Additionally, personal contacts play a significant role in Sub-Saharan Africa as do
information flows Latin America & Caribbean. Information flows and the political
dimensions of globalization affect the competitiveness of countries belonging to the
East Asia & Pacific region. The competitiveness of countries from Middle East &
North Africa depends on personal contacts only.
Personal contacts, information flows, and cultural proximity are the dimensions of
globalization which affect international competitiveness in Europe & Central Asia as
well as North America. With the exception of information flows, all of these
dimensions have a positive impact on competitiveness.
Actual flows have no influence on international competitiveness in any of the regions
studied here. However, this dimension is statistically significant in upper-middle
income countries, as we mentioned when analyzing Table 5.
5. Conclusions and Political Implications
Globalization variously affects a country’s competitiveness, depending on geographic
location and economic development. Competitiveness in low-income countries is
47
Adamkiewicz-Drwiłło & Maciej Kot
influenced only by international trade and investment restrictions (the economic
dimension of globalization). In middle-income countries, information flows (the social
dimensions of globalization), and political dimension are decisive for competitiveness.
Finally, all the social dimensions of globalization affect international competitiveness
of high income countries.
Geography appears to diversify the way in which individual dimensions of
globalization affect international competitiveness. International trade and investment
restrictions are the main dimensions influencing competitiveness in South Asia, SubSaharan Africa, and Latin America & Caribbean. However, some social dimensions
of globalization, such as personal contacts and information flows, are also important.
The social dimensions of globalization influence the competitiveness of East Asia &
Pacific, Middle East & North Africa, as well as Europe & Central Asia & North
America. The political dimension of globalization influences competitiveness only in
East Asia & Pacific.
We can formulate the following political recommendations in order to enhance
potential growth. Developing countries should ease international trade and
investment restrictions, and also increase information flow and political globalization.
On the other hand, developed countries should pay special attention to the social
dimension of globalization. Geographical location should also be taken into account
when planning policy scenarios towards the improvement of international
competitiveness by means of globalization.
The above conclusions and policy recommendations are preliminary and should be
treated with due caution. Our study is a static one because it is based on the data of
one year only. However, we intend to take dynamic aspects into account in further
research.
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