economic globalization and its effect on income...
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ECONOMIC GLOBALIZATION AND ITS EFFECT ON INCOME INEQUALITY
Florian Springholz
Supervisor: Jakob Kapeller
MAIN RESEARCH QUESTIONS
How can economic globaliza/on (i.e. openness) be measured? ¢
What are exis/ng measures of openness?£
Which aspects of openness do they capture?£
What is effect of economic globaliza/on on income inequality?¢
MOTIVATION
Mixed results of the effects of economic globaliza7on due to Ø
measurement problems
Current research focus in the economic literature is typically on the Ø
effect of openness on economic growth
One of the main difficul1es in obtaining conclusive empirical evidence on the consequences of globaliza1on is the shortage of
convincing measures. (Arribas, 2007, p.7)
OUTLINE
Part 1: Analysis of exis2ng openness indicators¢
Literature review£
Classifica0on of indices£
Trends of trade and financial globaliza0on£
Panel dataset: correla0on analysis & interpreta0on£
Part 2:“Impact of openness on inequality”¢
Why income inequality maBers£
Recent empirical results£
New results£
WHY INEQUALITY MATTERS
Physical and mental health
Trust and social cohesion
Equality of opportunities
Social dimension
Countries with lower levels of inequality score be8er on several important social dimensions
Themajordeterminantofanindividual‘ssuccessistheincomeandeducationoftheparents.(Stiglitz,2012)
e.g. Atkinson (2015), Roemer et al. (2017), World Bank report (2016)
e.g. Wilkinson and PickeF (2010), Rowlingson (2011)
EQUALITY OF OPPORTUNITIES
“Great Gatsby Curve”: Less Income Inequality is associated with better Social Mobility across the Generations
Source: Corak (2013)
Economic Growth
Financial Stability
Economic dimensionAmbivalent relationshipØ A market-oriented economy needs
some degree of inequality
Ø Higher inequality reduces the growth rate in the long-run
Rising Inequality Ø is associated with rising debt-leverageHigh debtØ -leverage increases the risk of loan defaults and financial bubbles
e.g. Cingano, (2014); Dabla-Norris et al. (2015); OECD (2014); Ostry et al. (2014); Zweimüller et al. (2014)
e.g. Barba & Pivetti (2009), Kirschenmann et al. (2015); Kumhof et al. (2015); Malinen (2016)
Rising inequality nega.vely affects social outcomes, financial stability ¢
and economic development
What is the role of economic globaliza3on? ¢
Does more “openness” cause more inequality?¢
WHY INCOME INEQUALITY MATTERS
The ques(on is not about whether we should allow income inequality or not, it’s about the level of inequality we should approach to foster economic
stability and to ensure equality of opportuni(es
De-facto measures
¢ Trade Openness£ Exports – Imports (% GDP)
£ Trade (% GDP)
¢ Financial Openness £ Total foreign assets
and liabilities % GDP
£ Foreign Direct Investment % GDP
De-jure measures
Trade¢ Openness£ Tariff rates
Non£ -tariff trade barriers
Financial¢ Openness Capital Account RestricFons£
FDI RestricFons£
MEASURES OF ECONOMIC GLOBALIZATION
DIMENSIONS OF ECONOMIC GLOBALIZATION
De-facto measuresOutcome¢ -based Measuring the actual degree of ¢
a country’s economic integra9on
De-jure measuresPolicy¢ -basedMeasuring a country's’ ¢
willingness to be open
Hybrid measures Combination of
de-facto and de-jure measures
RECENT EMPIRICAL RESULTS
¢ Jaumotte et al. (2013): “Rising Income Inequality: Technology, or Trade and Financial Globalization?”. IMF Economic Review
Main findings: impact on inequality¢
Trade openness Ø
Financial openness Ø
Technological advancement Ø
ReplicaCon and ModificaCon: ¢
Do results depend on the measurement?Ø
ESTIMATION MODEL
Panel regression with country fixed effects and 6me dummies¢
Specifica(on¢ :
Robustness check by subs6tu6ng ¢
applied openness indicatorsØ
technology proxyØ
KOF ECONOMIC GLOBALIZATION INDEX
Weight Source50%
Trade to GDP ratio 21% World Bank (2016)
FDI total stocks 28% UNCTAD (2016)
Portfolio Investment stock 24% IMF (2016)
Income Payments to Foreign Nationals (% GDP) 27% World Bank (2016)
50%
Hidden Import Barriers 22% Gwartney et al. (2016)
Mean Tariff Rate 28% Gwartney et al. (2016)
Taxes on International Trade (% of current revenue) 26% World Bank (2016)
Capital Account Restrictions 24% Gwartney et al. (2016)
(2) De-jure economic globalization
(1) De-facto economic globalizationKOF Economic Globalization Index
Robustness check of Jaumotte et al. (2013) results (Dependent Variable: Natural Logarithm of Gini coefficient)
(1) (2) (3) (4) (5) (6)
Model specification
Original results
Replication results
Substitution of globalization
indicators
Substitution of globalization
indicators
Substitution of technology
proxy
Substitution of technology proxy and
globalization indicators
Substitution of technology
proxy and globalization
indicators
Economic Globalization
KOF hybrid 0.017 0.002 KOF de-facto 0.048* 0.024 KOF de-jure -0.041 -0.026 Trade Openness Trade ratio (de-facto) -0.058* -0.052* 0.002
Tariff rates (de-jure) -0.002* -0.003** -0.002
Financial Openness Total foreign assets and liabilities (de-facto) 0.035* 0.034** -0.002
Financial Restrictions (de-jure) 0.000 -0.002 0.000
Technology Share of ICT capital in total capital stock 0.075*** 0.072*** 0.044** 0.039*
Economic Complexity Index (ECI Index) 0.005 0.008 0.001
With ICT share as technology proxy With ECI Index as technology proxy
Control variables
Credit to private sector 0.063*** 0.067*** 0.068*** 0.066*** 0.053*** 0.068*** 0.067***
Pop. Share with secondary education 0.004 0.004** 0.003* 0.004** 0.005*** 0.007*** 0.007***
Average years of schooling -0.298 -0.245 -0.264 -0.252 -0.350** -0.431*** -0.457***
Agriculture employment 0.017 0.013 -0.015 -0.018 0.028 0.038 0.041
Industry employment -0.100** -0.112*** -0.181*** -0.159*** -0.114** -0.160*** -0.135***
R-squared N.A. 0.344 0.295 0.316 0.287 0.423 0.426
Observations N.A. 297 299 299 341 370 370
Number of countries N.A. 56 57 57 64 68 68
Country FE YES YES YES YES YES YES YES
Year FE YES YES YES YES YES YES YES
Notes: The regressions were estimated using panel regressions with country fixed effects and time dummies. *denotes significance at the 10 percent level, **denotes significance at the 5 percent level, ***denotes significance at the 1 percent level. All explanatory variables are in natural logarithm,
except the tariff measure, the capital account openness index, economic complexity index and the population share with at least a secondary education. ICT= information and communications technology.
ICT share as technology proxy Complexity Index as technology proxy
Robustness check of Jaumotte et al. (2013) results (Dependent Variable: Natural Logarithm of Gini coefficient)
(1) (2) (3) (4) (5) (6)
Model specification
Original results
Replication results
Substitution of globalization
indicators
Substitution of globalization
indicators
Substitution of technology
proxy
Substitution of technology proxy and
globalization indicators
Substitution of technology
proxy and globalization
indicators
Economic Globalization
KOF hybrid 0.017 0.002 KOF de-facto 0.048* 0.024 KOF de-jure -0.041 -0.026 Trade Openness
Trade volume (de-facto) -0.058* -0.052* 0.002
Tariff rates (de-jure) -0.002* -0.003** -0.002
Financial Openness
Total foreign assets and liabilities (de-facto) 0.035* 0.034** -0.002
Financial Restrictions (de-jure) 0.000 -0.002 0.000
Technology
Share of ICT investment in total capital stock 0.075*** 0.072*** 0.044** 0.039*
Economic Complexity Index (ECI Index) 0.005 0.008 0.001
Control variables
Credit to private sector 0.063*** 0.067*** 0.068*** 0.066*** 0.053*** 0.068*** 0.067***
Pop. Share with secondary education 0.004 0.004** 0.003* 0.004** 0.005*** 0.007*** 0.007***
Average years of schooling -0.298 -0.245 -0.264 -0.252 -0.350** -0.431*** -
0.457*** Agriculture employment 0.017 0.013 -0.015 -0.018 0.028 0.038 0.041
Industry employment -0.100** -0.112*** -0.181*** -0.159*** -0.114** -0.160*** -
0.135*** R-squared N.A. 0.344 0.295 0.316 0.287 0.423 0.426
Observations N.A. 297 297 297 297 297 297
Number of countries N.A. 56 56 56 56 56 56
Country FE YES YES YES YES YES YES YES
Year FE YES YES YES YES YES YES YES
Notes: The regressions were estimated using panel regressions with country fixed effects and time dummies. *denotes significance at the 10 percent level, **denotes significance at the 5 percent level, ***denotes significance at the 1 percent level. All explanatory variables are in natural logarithm,
except the tariff measure, the capital account openness index, economic complexity index and the population share with at least a secondary education. ICT= information and communications technology.
PRELIMINARY CONCLUSION
¢ Results not robust to changes of indicators
¢ Concerns about dataØ Low number of observations (~290)
Ø Relative short time period covered (1990-2003)
Ø “Weak” data: inter and extrapolation of nearly all variables
Panel regression with country fixed effects and 6me dummies¢
Specifica(on¢ :
Three models based on different specifica(ons¢
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OWN ESTIMATION MODEL
Observations Countries Time
BIG sample 2.568 ~ 108 1972 – 2015
MID sample 905 ~ 89 1992 – 2015
OECD sample 417 33 1992 – 2015
Jaumotte sample 297 54 1990 – 2003
DATA – MAIN VARIABLESProxy Dependent Variable Source
Income Inequality GINI coefficient Milanovic (2016)
Proxy Independent Variables Source
Economic GlobalizationKOF Economic Globalization
Index (de-facto / de-jure)Dreher et. al. (2017)
Trade Openness
Trade ratio
Export ratio
Import ratio
Trade Restrictions (FTI Index)
World Bank (2016)
Gwartney et al. (2017)
Financial Openness
Total foreign assets & liabilities
Foreign Direct Investment
Portfolio equity
Capital Account Restrictions
(KAOPEN Index)
Lane & Milesi-Ferretti
(2017)
OECD (2017)
Chinn & Ito (2017)
DATA – CONTROL VARIABLESProxy Independent Variables Source
Technological change Economic Complexity Index Hidalgo et al. (2017)
Financial development Credit to private sector IMF (2017)
Education
Primary enrolment ratio
UNESCO (2017)Secondary enrolment ratio
Tertiary enrolment ratio
Economic development(“trickle-down effect”)
Industry employment share ILOSTAT (2017)
World Bank (2017)
Agriculture employment share
GDP growth
Social Security Social expenditures ratio OECD (2018)
Employment Protection Legislation
Individual and collective dismissals OECD (2018)
Temporary contracts
BIG SAMPLE MID SAMPLE SMALL SAMPLE Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Economic Globalization
KOF hybrid 0.098*** 0.153*** 0.304*** KOF de-facto 0.089*** 0.083*** 0.257*** KOF de-jure 0.011 0.064*** 0.060**
Technology
Economic Complexity -0.004 -0.003 -0.018 -0.014 -0.003 -0.011
Controls
Credit to private sector 0.011** 0.014** -0.030*** -0.033*** -0.012 -0.020 Primary enrolment -0.063*** -0.059*** -0.128*** -0.141*** -0.029 -0.009 Secondary enrolment 0.007 0.013 -0.006 -0.013 Tertiary enrolment 0.023 0.022 0.008 0.005 Industrial employment -0.162*** -0.165*** -0.207*** -0.206*** Agricultural employment -0.032** -0.033** 0.034 0.047 GDP growth -0.001* -0.002** 0.001 0.001
Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.079*** -0.048
Temporary employment -0.037*** -0.035***
Social protection
Social expenditures -0.083** -0.071*
Constant 3.607*** 3.574*** 4.208*** 4.297*** 3.519*** 3.273*** Adjusted R2 0.046 0.054 0.111 0.114 0.250 0.276 Observations 2,586 2,586 1,061 1,061 417 417 Number of countries 108 108 89 89 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES
Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
Only OECD countries
FINDINGS
Main findings: impact on inequality¢
Economic Globalization Ø (coeffs. highly significant)
Technological Ø advancement (coeffs. not significant!)
Social expenditures Ø (coeffs. significant)
Employment Protection Legislation Ø (coeffs. significant)
Results¢ of educa&on, financial and economic development depend on
underlying sample
BIG SAMPLE MID SAMPLE SMALL SAMPLE Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6) Trade dimension Total Trade 0.064*** 0.055** 0.182*** Exports 0.068*** 0.048* -0.064 Imports 0.010 -0.006 0.239*** Trade Restrictions (FTI Index)
0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033
Financial dimension
Total assets and liabilities. -0.005 -0.019 -0.054** Portfolio equity 0.006* 0.008 0.015 FDI inward 0.016*** 0.011 0.029* FDI outward -0.003 -0.004 -0.012 Financial Restrictions (KAOPEN Index)
0.000** 0.000 0.000 -0.000 0.001 0.001*
Technology Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 Other controls Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 Secondary enrolment -0.014 -0.022 -0.030 0.033 Tertiary enrolment 0.029* 0.023 0.021 0.008 Industrial employment -0.191*** -0.179*** -0.285*** -0.188*** Agricultural employment -0.027* -0.026* 0.028 0.039 GDP growth 0.001 0.000 0.001 -0.001 Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.057* -0.062*
Temporary contracts -0.035*** -0.031*** Social protection Social expenditures -0.139*** -0.120*** Constant 3.235*** 3.339*** 3.757*** 3.617*** 3.287*** 3.520***
R-squared 0.087 0.109 0.116 0.141 0.289 0.293 Observations 2,347 1,571 960 899 419 417 Number of countries 102 98 81 76 33 33
Only OECD countries
CONCLUSIONS
¢ Overall tendency that economic globalization increases the Gini coefficient
¢ KOF indicators produce the most robust results and highly significant positive coefficients across all different samples
¢ When using more disaggregated measures, the results depend more on specification and underlying sample
¢ Robustness checks e.g. with Gini disposable (net) instead of Gini market (gross) lead to same conclusions
BACKUP &
EXTENSIONS
MODEL #1: Economic Globalization Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable
Standard errors in parentheses. Data description and sources are available in the appendix.
Levels of significance: *** p<0.01, ** p<0.05, * p<0.1
VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9) KOF Economic Globalization Index
0.108*** 0.099*** 0.082*** 0.098*** 0.126*** 0.110*** 0.124*** 0.131*** 0.153*** (0.011) (0.013) (0.013) (0.014) (0.016) (0.018) (0.025) (0.025) (0.029)
Economic Complexity 0.007 0.009 -0.004 -0.023*** -0.024** -0.006 -0.011 -0.018 (0.007) (0.007) (0.008) (0.009) (0.010) (0.015) (0.015) (0.017)
Credit to private sector 0.010** 0.011** 0.018*** 0.012* -0.017* -0.021** -0.030*** (0.004) (0.004) (0.006) (0.007) (0.009) (0.009) (0.010)
Primary enrolment -0.063*** -0.054** -0.080*** -0.139*** -0.138*** -0.128*** (0.020) (0.024) (0.028) (0.036) (0.036) (0.042)
Secondary enrolment -0.056*** -0.047*** -0.015 0.006 0.007 (0.014) (0.017) (0.023) (0.024) (0.026)
Tertiary enrolment -0.008 0.024* 0.020 0.023 (0.010) (0.013) (0.013) (0.015)
Industrial employment -0.132*** -0.153*** -0.162*** (0.028) (0.029) (0.032)
Agricultural employment -0.040*** -0.032** (0.014) (0.014)
GDP growth -0.001* (0.001)
Constant 3.327*** 3.341*** 3.415*** 3.607*** 3.621*** 3.758*** 4.235*** 4.327*** 4.208*** (0.043) (0.047) (0.047) (0.101) (0.108) (0.131) (0.172) (0.174) (0.206)
R-squared 0.044 0.039 0.042 0.046 0.073 0.071 0.099 0.106 0.111
Observations 4,340 3,502 2,906 2,586 2,216 1,845 1,217 1,217 1,061 Number of countries 147 110 110 108 107 107 106 106 89
MODEL #2: De-jure and de-facto Economic Globalization Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable
Standard errors in parentheses. Data description and sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1
VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9) Economic Globalization de-facto
0.079*** 0.074*** 0.086*** 0.089*** 0.111*** 0.103*** 0.055*** 0.063*** 0.083*** (0.008) (0.010) (0.011) (0.012) (0.012) (0.014) (0.019) (0.019) (0.022)
Economic Globalization de-jure
0.016** 0.014* 0.006 0.011 0.018* 0.010 0.062*** 0.062*** 0.064*** (0.008) (0.008) (0.008) (0.009) (0.009) (0.012) (0.018) (0.018) (0.021)
Economic Complexity 0.005 0.008 -0.003 -0.022** -0.021** -0.005 -0.009 -0.014 (0.008) (0.007) (0.008) (0.009) (0.010) (0.015) (0.015) (0.018)
Credit to private sector 0.011** 0.014** 0.013** 0.008 -0.016* -0.021** -0.033*** (0.005) (0.006) (0.006) (0.007) (0.009) (0.009) (0.010)
Primary enrolment -0.059*** -0.060** -0.089*** -0.143*** -0.144*** -0.141*** (0.020) (0.024) (0.028) (0.037) (0.037) (0.042)
Secondary enrolment -0.043*** -0.030* -0.016 0.007 0.013 (0.014) (0.017) (0.024) (0.025) (0.027)
Tertiary enrolment -0.013 0.024* 0.020 0.022 (0.010) (0.013) (0.013) (0.015)
Industrial employment -0.134*** -0.156*** -0.165*** (0.028) (0.029) (0.032)
Agricultural employment -0.040*** -0.033** (0.014) (0.014)
GDP growth -0.002** (0.001)
Constant 3.381*** 3.385*** 3.375*** 3.574*** 3.610*** 3.749*** 4.292*** 4.386*** 4.297*** (0.041) (0.046) (0.050) (0.101) (0.107) (0.129) (0.172) (0.174) (0.206)
R-squared 0.047 0.039 0.051 0.054 0.083 0.082 0.100 0.107 0.114
Observations 4,254 3,439 2,846 2,556 2,195 1,824 1,196 1,196 1,040 Number of countries 143 108 108 106 105 105 104 104 87
MODEL #3: Trade and financial dimension separated Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as Dependent Variable:
Standard errors in parentheses. Data sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1
VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9)
Trade-to-GDP 0.047*** 0.045*** 0.053*** 0.064*** 0.058*** 0.066*** 0.043** 0.054*** 0.055** (0.009) (0.010) (0.010) (0.011) (0.011) (0.013) (0.020) (0.020) (0.023)
Trade Restrictions 0.021*** 0.025*** 0.024*** 0.028*** 0.043*** 0.042*** 0.061** 0.062** 0.063** (0.006) (0.006) (0.006) (0.007) (0.007) (0.008) (0.026) (0.026) (0.029)
Financial assets and liabilities
0.007 0.002 0.003 -0.005 -0.000 -0.009 -0.006 -0.011 -0.019 (0.004) (0.005) (0.006) (0.006) (0.007) (0.008) (0.012) (0.012) (0.014)
Financial Restrictions 0.000** 0.000** 0.000** 0.000** 0.000* 0.000 0.000 0.000 0.000
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Economic Complexity -0.003 -0.009 -0.019** -0.021** -0.021** 0.011 0.008 0.003 (0.007) (0.007) (0.008) (0.009) (0.010) (0.016) (0.016) (0.019)
Credit to private sector 0.028*** 0.031*** 0.031*** 0.030*** 0.002 -0.001 0.006 (0.006) (0.006) (0.007) (0.008) (0.010) (0.010) (0.012)
Primary enrolment 0.011 0.045* 0.032 0.005 0.007 0.017 (0.022) (0.027) (0.033) (0.049) (0.049) (0.054)
Secondary enrolment -0.053*** -0.056*** -0.037 -0.024 -0.014 (0.014) (0.018) (0.025) (0.025) (0.028)
Tertiary enrolment -0.001 0.032** 0.030** 0.029* (0.010) (0.014) (0.014) (0.015)
Industrial employment -0.140*** -0.158*** -0.191*** (0.029) (0.030) (0.033)
Agricultural employment -0.030** -0.027* (0.013) (0.014)
GDP growth 0.001 (0.001)
Constant 3.459*** 3.453*** 3.339*** 3.235*** 3.214*** 3.247*** 3.686*** 3.758*** 3.757*** (0.042) (0.042) (0.046) (0.113) (0.123) (0.154) (0.250) (0.251) (0.276)
R-squared 0.056 0.067 0.078 0.087 0.112 0.119 0.101 0.105 0.116
Observations 3,632 3,081 2,618 2,347 2,032 1,677 1,087 1,087 960 Number of countries 135 106 105 102 98 96 96 96 81
MODEL #4: Trade and financial dimension separated and further disaggregated Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable:
Standard errors in parentheses. Data description and sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1
VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9)
Exports 0.027* 0.017 0.038** 0.045*** 0.033* 0.030 0.013 0.025 0.029 (0.014) (0.015) (0.015) (0.016) (0.018) (0.020) (0.022) (0.023) (0.024)
Imports 0.053*** 0.057*** 0.046*** 0.058*** 0.078*** 0.095*** 0.032 0.028 0.020 (0.015) (0.016) (0.016) (0.017) (0.018) (0.021) (0.026) (0.026) (0.028)
Trade Restrictions 0.028** 0.029** 0.030** 0.040*** 0.050*** 0.070*** 0.100*** 0.102*** 0.107*** (0.012) (0.012) (0.013) (0.015) (0.016) (0.017) (0.031) (0.031) (0.033)
Portfolio Equity -0.000 -0.004 -0.001 -0.000 -0.003 -0.009** 0.009* 0.008* 0.006 (0.002) (0.003) (0.003) (0.003) (0.003) (0.004) (0.005) (0.005) (0.005)
FDI inward 0.011** 0.016*** 0.028*** 0.029*** 0.035*** 0.031*** 0.014* 0.015* 0.018** (0.005) (0.005) (0.006) (0.006) (0.007) (0.007) (0.008) (0.008) (0.009)
FDI outward -0.002 -0.000 -0.007** -0.008** -0.013*** -0.019*** -0.002 -0.002 -0.003 (0.003) (0.003) (0.003) (0.003) (0.003) (0.004) (0.004) (0.004) (0.005)
Financial Restrictions 0.000** 0.000* 0.000* 0.000*** 0.000*** 0.000** 0.000 -0.000 -0.000
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Economic Complexity 0.008 0.007 -0.023* -0.028** -0.025* -0.013 -0.016 -0.017 (0.010) (0.010) (0.012) (0.012) (0.014) (0.017) (0.017) (0.019)
Credit to private sector 0.020*** 0.020*** 0.029*** 0.029*** -0.013 -0.016 -0.012 (0.007) (0.008) (0.008) (0.009) (0.010) (0.010) (0.012)
Primary enrolment 0.023 -0.006 -0.028 0.009 0.011 0.013 (0.034) (0.040) (0.046) (0.053) (0.053) (0.057)
Secondary enrolment -0.008 -0.020 0.008 0.022 0.029 (0.019) (0.024) (0.029) (0.030) (0.032)
Tertiary enrolment 0.005 0.023 0.021 0.023 (0.012) (0.015) (0.015) (0.016)
Industrial employment -0.187*** -0.199*** -0.217*** (0.032) (0.032) (0.035)
Agricultural employment -0.028** -0.027** (0.013) (0.014)
GDP growth 0.001 (0.001)
Constant 3.352*** 3.344*** 3.189*** 3.001*** 3.073*** 3.065*** 3.515*** 3.549*** 3.510*** (0.063) (0.063) (0.074) (0.175) (0.196) (0.223) (0.266) (0.266) (0.282)
R-squared 0.072 0.078 0.092 0.118 0.150 0.168 0.128 0.132 0.135 Observations 2,528 2,322 1,893 1,683 1,489 1,268 997 997 905 Number of countries 123 102 102 99 94 90 90 90 77
BIG SAMPLE MID SAMPLE SMALL SAMPLE
Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Economic Globalization
KOF hybrid 0.026 0.103*** 0.139**
KOF de-facto 0.048*** 0.092*** 0.098**
KOF de-jure -0.006 0.015 0.032
Technology
Economic Complexity 0.010 0.010 0.008 0.009 0.012 0.010
Controls
Credit to private sector 0.014*** 0.021*** 0.001 -0.005 -0.007 -0.007
Primary enrolment -0.035 -0.030 -0.061 -0.064 -0.147 -0.150
Secondary enrolment 0.001 0.017 -0.047 -0.044
Tertiary enrolment 0.016 0.013 -0.020 -0.021
Industrial employment -0.089*** -0.088*** -0.146*** -0.147***
Agricultural employment -0.026** -0.030*** -0.022 -0.018
GDP growth 0.001 0.000 0.001 0.001
Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.013 -0.006
Temporary employment -0.011 -0.011
Social protection
Social expenditures -0.044 -0.046
Constant -0.995*** -1.100*** -0.905*** -0.918*** -0.119 -0.074 Observations 2,559 2,529 1,192 1,171 476 476 Number of countries 110 108 88 86 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES
Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
Gini disposable from SWIID database
Benchmark model 1
KOF Economic Globalization
Full table with Std. Errors
BIG SAMPLE MID SAMPLE SMALL SAMPLE
Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Trade dimension
Total Trade -0.026** 0.006 0.086**
Exports 0.033** 0.043** 0.083**
Imports -0.030* -0.006 -0.014
Trade Restrictions (FTI Index)
0.028*** -0.024 0.034 0.033 -0.066 -0.110
Financial dimension
Total assets and liabilities. 0.038*** 0.034*** -0.039*
Portfolio equity 0.003 -0.001 0.008
FDI inward 0.022*** 0.017** 0.005
FDI outward -0.006** -0.019*** -0.010
Financial Restrictions (KAOPEN Index)
0.000 0.000 -0.000 0.000 0.000 0.000
Technology
Economic Complexity 0.013 0.024** 0.018 0.031* 0.020 0.018
Other controls
Credit to private sector 0.021*** 0.021*** 0.004 0.016 0.027 0.015
Primary enrolment 0.052* 0.024 0.023 0.027 0.017 -0.033
Secondary enrolment 0.022 -0.011 -0.071* -0.059
Tertiary enrolment 0.023* 0.016 -0.031 -0.034
Industrial employment -0.082*** -0.083*** -0.155*** -0.096**
Agricultural employment -0.021* -0.035*** -0.004 -0.014
GDP growth 0.002** 0.001 0.000 0.001
Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.009 -0.002
Temporary contracts -0.008 -0.006
Social protection
Social expenditures -0.055* -0.025
Constant -1.474*** -1.197*** -1.371*** -1.233*** -0.179 -0.078
Observations 2,367 1,763 1,110 1,051 468 466 Number of countries 106 102 82 79 33 33 Country FE YES YES YES YES YES YES
Gini disposable
Benchmark model 2
Trade and Financial dimension disaggregated
Full table with Std. Errors
Benchmark model 1
KOF Economic Globalization
Full table with Std. Errors
BIG SAMPLE MID SAMPLE SMALL SAMPLE
Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Economic Globalization
KOF hybrid 0.098*** 0.153*** 0.304*** (0.014) (0.029) (0.063)
KOF de-facto 0.089*** 0.083*** 0.257*** (0.012) (0.022) (0.048)
KOF de-jure 0.011 0.064*** 0.060** (0.009) (0.021) (0.052)
Technology
Economic Complexity -0.004 -0.003 -0.018 -0.014 -0.003 -0.011 (0.008) (0.008) (0.017) (0.018) (0.032) (0.031)
Controls
Credit to private sector 0.011** 0.014** -0.030*** -0.033*** -0.012 -0.020 (0.004) (0.006) (0.010) (0.010) (0.023) (0.022)
Primary enrolment -0.063*** -0.059*** -0.128*** -0.141*** -0.029 -0.009 (0.020) (0.020) (0.042) (0.042) (0.137) (0.135)
Secondary enrolment 0.007 0.013 -0.006 -0.013 (0.026) (0.027) (0.051) (0.051)
Tertiary enrolment 0.023 0.022 0.008 0.005 (0.015) (0.015) (0.027) (0.026)
Industrial employment -0.162*** -0.165*** -0.207*** -0.206*** (0.032) (0.032) (0.055) (0.054)
Agricultural employment -0.032** -0.033** 0.034 0.047 (0.014) (0.014) (0.039) (0.039)
GDP growth -0.001* -0.002** 0.001 0.001 (0.001) (0.001) (0.001) (0.001)
Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.079*** -0.048 (0.031) (0.032)
Temporary employment -0.037*** -0.035*** (0.010) (0.010)
Social protection
Social expenditures -0.083** -0.071* (0.038) (0.037)
Constant 3.607*** 3.574*** 4.208*** 4.297*** 3.519*** 3.273*** (0.101) (0.101) (0.206) (0.206) (0.703) (0.692)
R-squared 0.046 0.054 0.111 0.114 0.250 0.276 Observations 2,586 2,586 1,061 1,061 417 417 Number of countries 108 108 89 89 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES
Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
BIG SAMPLE MID SAMPLE SMALL SAMPLE
Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Trade dimension
Total Trade 0.064*** 0.055** 0.182*** (0.011) (0.023) (0.042)
Exports 0.068*** 0.048* -0.064 (0.017) (0.025) (0.048)
Imports 0.010 -0.006 0.239*** (0.018) (0.028) (0.054)
Trade Restrictions (FTI Index)
0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033 (0.007) (0.016) (0.029) (0.033) (0.086) (0.093)
Financial dimension
Total assets and liabilities. -0.005 -0.019 -0.054** (0.006) (0.014) (0.023)
Portfolio equity 0.006* 0.008 0.015 (0.003) (0.005) (0.012)
FDI inward 0.016*** 0.011 0.029* (0.005) (0.008) (0.016)
FDI outward -0.003 -0.004 -0.012 (0.003) (0.006) (0.010)
Financial Restrictions (KAOPEN Index)
0.000** 0.000 0.000 -0.000 0.001 0.001* (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Technology
Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 (0.008) (0.012) (0.019) (0.021) (0.032) (0.033)
Other controls
Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 (0.006) (0.008) (0.012) (0.012) (0.025) (0.025)
Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 (0.022) (0.036) (0.054) (0.058) (0.141) (0.137)
Secondary enrolment -0.014 -0.022 -0.030 0.033 (0.028) (0.034) (0.053) (0.052)
Tertiary enrolment 0.029* 0.023 0.021 0.008 (0.015) (0.016) (0.029) (0.028)
Industrial employment -0.191*** -0.179*** -0.285*** -0.188*** (0.033) (0.036) (0.056) (0.056)
Agricultural employment -0.027* -0.026* 0.028 0.039 (0.014) (0.014) (0.040) (0.041)
GDP growth 0.001 0.000 0.001 -0.001 (0.001) (0.001) (0.002) (0.002)
Benchmark model 2
Trade and Financial dimension disaggregated
Full table with Std. Errors
Employment Protection Legislation (EPL)
Individual and collective dismissals
-0.057* -0.062* (0.033) (0.033)
Temporary contracts -0.035*** -0.031*** (0.011) (0.010)
Social protection
Social expenditures -0.139*** -0.120*** (0.039) (0.039)
Constant 3.235*** 3.339*** 3.757*** 3.617*** 3.287*** 3.520*** (0.113) (0.185) (0.276) (0.289) (0.758) (0.721)
R-squared 0.087 0.109 0.116 0.141 0.289 0.293 Observations 2,347 1,571 960 899 419 417 Number of countries 102 98 81 76 33 33 Country FE YES YES YES YES Year FE YES YES YES YES
Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1
BIG SAMPLE MID SAMPLE SMALL SAMPLE
Observations 2,586 1,061 417 Number of countries 108 89 33
Model specification (1) (2) (3) (4) (5) (6)
Trade dimension
Total Trade 0.064*** 0.055** 0.182*** (0.011) (0.023) (0.042)
Exports 0.068*** 0.048* -0.064 (0.017) (0.025) (0.048)
Imports 0.010 -0.006 0.239*** (0.018) (0.028) (0.054)
Trade Restrictions (FTI Index)
0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033 (0.007) (0.016) (0.029) (0.033) (0.086) (0.093)
Financial dimension
Total assets and liabilities. -0.005 -0.019 -0.054** (0.006) (0.014) (0.023)
Portfolio equity 0.006* 0.008 0.015 (0.003) (0.005) (0.012)
FDI inward 0.016*** 0.011 0.029* (0.005) (0.008) (0.016)
FDI outward -0.003 -0.004 -0.012 (0.003) (0.006) (0.010)
Financial Restrictions (KAOPEN Index)
0.000** 0.000 0.000 -0.000 0.001 0.001* (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
Technology
Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 (0.008) (0.012) (0.019) (0.021) (0.032) (0.033)
Other controls
Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 (0.006) (0.008) (0.012) (0.012) (0.025) (0.025)
Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 (0.022) (0.036) (0.054) (0.058) (0.141) (0.137)
Secondary enrolment -0.014 -0.022 -0.030 0.033 (0.028) (0.034) (0.053) (0.052)
Tertiary enrolment 0.029* 0.023 0.021 0.008 (0.015) (0.016) (0.029) (0.028)
Industrial employment -0.191*** -0.179*** -0.285*** -0.188*** (0.033) (0.036) (0.056) (0.056)
Agricultural employment -0.027* -0.026* 0.028 0.039 (0.014) (0.014) (0.040) (0.041)
GDP growth 0.001 0.000 0.001 -0.001 (0.001) (0.001) (0.002) (0.002)
Benchmark model 2 cont.
Trade and Financial dimension disaggregated
Full table with Std. Errors
ECONOMIC COMPLEXITY INDEX(ECI)
¢ Proposed in 2009 byØ Cesar Hidalgo (Massachusetts Institute of Technology) Ø Ricardo Hausmann (Harvard University)
¢ Holistic measure of a country’s production characteristics
¢ To achieve this goal, the ECI combines metrics of the diversity of countries and the ubiquity of products to create measures of the relative complexity of a country's exports
Source: https://atlas.media.mit.edu/en/rankings/country/eci/
ECONOMIC COMPLEXITY RANKING(2016)
Rank Country ECI Index
64 Algeria -0,78
65 Senegal -0,81
66 Cambodia -0,82
67 Georgia -0,84
68 Sri Lanka -0,85
69 Chile -0,86
70 Botswana -0,99
71 Albania -1,00
72 Paraguay -1,04
73 Mali -1,06
74 Pakistan -1,07
75 Morocco -1,09
76 Peru -1,11
77 Zimbabwe -1,14
78 Ghana -1,19
79 Laos -1,21
80 Tanzania -1,21
81 Ethiopia -1,33
82 Ecuador -1,38
83 Madagascar -1,56
84 Mongolia -1,76
Rank Country ECI Index
1 Switzerland 2,60
2 Japan 2,47
3 Singapore 2,13
4 South Korea 1,98
5 Germany 1,90
6 Sweden 1,59
7 United States 1,55
8 United Kingdom 1,55
9 Czech Republic 1,40
10 Israel 1,37
11 Ireland 1,31
12 Hong Kong 1,23
13 France 1,16
14 Malaysia 1,03
15 Hungary 1,03
16 Belgium 1,00
17 Italy 0,95
18 China 0,89
19 Slovakia 0,87
20 Norway 0,82
21 Denmark 0,81
Rank Country ECI Index
: : :
: : :
34 Serbia 0,07
35 Portugal 0,07
36 India 0,05
37 Philippines 0,05
38Bosnia and
Herzegovina0,03
39 Jordan -0,01
40 Turkey -0,04
41 South Africa -0,04
42 Tunisia -0,09
43 Brazil -0,10
44 Colombia -0,12
45New
Zealand-0,13
46 Costa Rica -0,18
47 Greece -0,20
48 El Salvador -0,26
49 Uruguay -0,35
: : :
: : :
Weight Source Definition
50%
Trade to GDP ratio 21% World Bank (2016) Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product. Data are in percent of GDP.
FDI total stocks 28% UNCTAD (2016) Sum of inward and outward FDI stock as a percentage of GDP.
Portfolio Investment stock 24% IMF (2016) Portfolio investment is the sum of portfolio investment assets stocks and portfolio investment liabilities stocks. Data are in percent of GDP.
Income Payments to Foreign Nationals (percent of GDP)
27% World Bank (2016)
Income payments refer to employee compensation paid to nonresident workers and investment income (payments on direct investment, portfolio investment, other investments). Income derived from the use of intangible assets is excluded. Data are in percent of GDP.
50%
Hidden Import Barriers 22% Gwartney et al. (2016)
The index is based on the Global Competitiveness Report’s survey question: “In your country, tariff and non-tariff barriers significantly reduce the ability of imported goods to compete in the domestic market.” The question’s wording has varied slightly over the years.
Mean Tariff Rate 28% Gwartney et al. (2016) As the mean tariff rate increases, countries are assigned lower ratings. The rating declines toward zero as the mean tariff rate
Taxes on International Trade (percent of current revenue)
26% World Bank (2016)
Taxes on international trade include import duties, export duties, profits of export or import monopolies, exchange profits, and exchange taxes. Current revenue includes all revenue from taxes and nonrepayable receipts (other than grants) from the sale of land, intangible assets, government stocks, or fixed capital assets, or from capital transfers from nongovernmental sources. It also includes fines, fees, recoveries, inheritance taxes, and nonrecurrent levies on capital. Data are for central government and in percent of all current
Capital Account Restrictions 24% Gwartney et al. (2016)
Index based on two components: (i) Beginning with the year 2002, this sub- component is based on the question: “Foreign ownership of companies in your country is (1) rare, limited to minority stakes, and often prohibited in key sectors or (2) prevalent and encouraged”. For earlier years, this sub-component was based on two questions about “Access of citizens to foreign capital markets and foreign access to domestic capital markets”. (ii) Index based on the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions, including 13 different types of capital controls. It is constructed by subtracting the number of restrictions from 13 and multiplying the result by 10.
(2) De-jure economic globalization
(1) De-facto economic globalization
KOFEconomicGlobalizationIndex
KOF ECONOMIC GLOBALIZATION INDEX
MEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source
Financial
OpennessIndex
(LMF_OPEN)
ThisindexrepresentsthesumofTotalForeignAssestsandTotalForeignLiabilitiesin%GDP
CONTINUOUS %ofGDP 211 1970-2015
Equity-based
Financial
Integration
(LMF_EQ)
ThisindexrepresentsthesumofPortfolioEquityAssets(stocks)andPortfolioEquityLiabilities(stocks)
CONTINUOUS %ofGDP 211 1970-2015
PrivateFinancial
OpennessIndex
(OPEN_pv)
Theopen_pvIndexmakesadistinctionbetweenprivateandofficialfinancialopenness(LMF_open)bysubtractingofficialdevelopmentaid(DA)fromforeignliablities(FL)andinternationalreserves(IR)fromforeignassets(FA).Inthissense,privatefinancialopennessrepresentsprivateagents’willingnessandabilitytoinvestabroadandtoincurforeigndebt.
CONTINUOUS %ofGDP 190 1970-2014Steiner&Saadma
(2016)
ForeignDirect
Investment
liabilitiesstock
(FDI_inward)
TheinwardFDIstockrepresentsthevalueofforeigninvestors'equityinandnetloanstoenterprisesresidentinthereportingeconomy.
ForeignDirect
Investmentasset
stock
(FDI_outward)
TheoutwardFDIstockrepresentsthevalueoftheresidentinvestors'equityinandnetloanstoenterprisesinforeigneconomies.
Notes:*AREAER=AnnualReportonExchangeArrangementsandRestrictions(IMF)
FINANCIAL
DE-FACTO
Lane&Milesi-
Ferretti,2017
(publiclyavailable)
CONTINUOUS %ofGDP
190
(LMF)
179
(UNCTAD)
1970-2015
(LMF)
1980-2016
(UNCTAD)
Lane&Milesi-
Ferretti,2017
(publiclyavailable)
UNCTAD,2017
(publiclyavailable)
CLASSIFICATION OF FINANCIAL INDICES
CLASSIFICATION OF FINANCIAL INDICES
MEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source
Financial
OpennessIndex
(LMF_OPEN)
ThisindexrepresentsthesumofTotalForeignAssestsandTotalForeignLiabilitiesin%GDP
211 1970-2015
Equity-based
Financial
Integration
(LMF_EQ)
ThisindexrepresentsthesumofPortfolioEquityAssetsandLiabilities(stocks)
211 1970-2015
PrivateFinancial
OpennessIndex
(OPEN_pv)
Theopen_pvIndexmakesadistinctionbetweenprivateandofficialfinancialopenness(LMF_open)bysubtractingofficialdevelopmentaid(DA)fromforeignliablities(FL)andinternationalreserves(IR)fromforeignassets(FA).Inthissense,privatefinancialopennessrepresentsprivateagents’willingnessandabilitytoinvestabroadandtoincurforeigndebt.
190 1970-2014Steiner&Saadma
(2016)
ForeignDirect
Investment
liabilitiesstock
(FDI_inward)
TheinwardFDIstockrepresentsthevalueofforeigninvestors'equityinandnetloanstoenterprisesresidentinthereportingeconomy.
ForeignDirect
Investmentasset
stock
(FDI_outward)
TheoutwardFDIstockrepresentsthevalueoftheresidentinvestors'equityinandnetloanstoenterprisesinforeigneconomies.
Notes:*LMF=LaneandMilesi-Ferretti
FINANCIAL
DE-FACTO
Lane&Milesi-Ferretti,2017
(publiclyavailable,henceforthLMF)
190(LMF)
179(UNCTAD)
1970-2015(LMF*)
1980-2016(UNCTAD)
Lane&Miles-Ferretti,2017
(publiclyavailable)
UNCTAD,2017(publiclyavailable)
CONTINUOUS
%ofG
DP
CLASSIFICATION OF FINANCIAL INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source
Chinn-Ito-Index(KAOPEN)
Table-basedAREAER*measure:-presenceofmultipleexchangerates(k1)-restrictionsoncurrentaccounttransactions(k2)-restrictionsoncapitalaccounttransactions(k3)-therequirementofthesurrenderofexportproceeds(k4)
CONTINUOUSINTERVAL
-1.90–2.37 182 1970-2015
ChinnandIto,2017
(publiclyavailable)
FinancialCurrentAccount(FIN_CURRENT)
Text-basedAREAER*measureFIN_CURRENTisbasedonhowcompliantagovernmentiswithitsobligationsundertheIMF’sArticleVIIItofreefromgovernmentrestrictiontheproceedsfrominternationaltradeofgoodsandservices
DISCRETEORDINAL
0–1000–8
94 1950-2004
CapitalAccountLiberalization(CAPITAL)
Text-basedAREAER*measureCAPITALisbasedonrestrictionsoncapitaloutflowsandinflows,withadistinctionbetweenresidentsandnon-residents
DISCRETEORDINAL
0–1000–4
94 1950-2004
CapitalAccountRestrictions(KA_Index)
Text-basedAREAER*measureSimilarthanCAPITALandFIN_CURRENTbutincludesfiner-granedsub-categoriesandinformationaboutdifferenttypesofrestrictions,assetcategories,directionofflowsandresidencyofagents.
DISCRETEORDINAL
0–1 91 1995-2005Schindler,2009
(publiclyavailable)
FinancialCurrentandCapitalAccount(FOI)
Tableandtext-basedAREAER*measureThemostcomprehensiveAREAER*measure.TheFOIincludesinformationontwelvecategoriesofcurrentandcapitalaccounttransactions(moreseetext)
DISCRETEORDINAL
0–12 187 1965-2004 Brune(2006)
InvestmentFreedom(HF_fin)
Non-AREAER*measureIndexstartsfrom100andthenpointsaredeductedduetoapenaltycatalogue.Informationbasedonofficialcountrypublications,theEconomistandUSgovernmentagencies,butexactcoding/methodologyremainsunclear.
DISCRETEORDINAL
0–100 186 1995-2017
HeritageFoundation,
2017(publiclyavailable)
Equitymarketliberalizationindicator
Non-AREAER*measureThisbinaryliberalizationindexcorrespondstoadateofformalregulatorychangeafterwhichforeigninvestorsofficiallyhavetheopportunitytoinvestindomesticequitysecurities.
DISCRETEBINARY
0–1 96 1980-2006Bekaert,HarveyandLundblad,
2010
FDIRegulatoryRestrictivenessIndex(FDI_Restrictions)
BasedonfourmaintypesofrestrictionsonFDI:-Foreignequitylimitations-Discriminatoryscreeningorapprovalmechanisms-Restrictionsontheemploymentofforeignersaskeypersonnel-Otheroperationalrestrictions,e.g.restrictionsonbranchingandoncapitalrepatriationoronlandownershipbyforeign-owendenterprises
CONTINUOUS 0–1 62
(1997,2003,2006)
Yearlydata2010-2016
OECD,2017(publiclyavailable)
FINANCIAL
DE-JURE
Quinn&Toyoda,2008
(publiclyavailable)
Notes:*AREAER=AnnualReportonExchangeArrangementsandRestrictions(IMF)
CLASSIFICATION OF TRADE INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source
TradeOpennessIndex
Exports(X)+Imports(M)in%GDPCONTINUOUS
RATIO%GDP 200 1960-2016
WorldBank,2017(publiclyavailable)
GeneralizedTrade
OpennessIndex
TheIndexrepresentsthetradevolumeasashareofacountry'sGDPfactor,definedbyaCES-functionofitsownGDPandthe
GDPoftherestoftheworld
CONTINUOUSRATIO
ownscala 145 1995-2004 Tang,2011
CompositeTradeShare
TradeVolume(X+M)in%GDP,adjustedbytheWorldTradeShare(WTS)
CONTINUOUSRATIO
ownscala 186 2000 Squalli&Wilson,2011
KOFde-facto
AverageofActualFlows(KOF_defacto)-TradeVolume
-ForeignDirectInvestment,stocks-PortfolioInvestment
-IncomePaymentstoForeignNationals
KOFde-jure
AverageofRestrictions(KOF_dejure)-HiddenImportBarriers
-MeanTariffRate-TaxesonInternationalTrade-CapitalAccountRestrictions
KOFEconomicGlobalization
AverageofKOFde-facto andKOFde-jure
0–100 207 1970-2014Dreheret.al.,2017(publiclyavailable)
TRAD
E
DE-FAC
TO
HYBR
ID(com
biningtrad
ean
dfin
ancia
lmeasures)
CONTINUOUSINTERVAL
CLASSIFICATION OF TRADE INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source
Sachs-Warnerindex
BinaryvariablebasedonWarner&Sachs(1995)criterion(seetextformoredetails)
DISCRETEBINARY
0–1 1183periodswitheacha10yearspan
SachsandWarner,1995ExtendedbyWacziarg&
Welch,2008andDollaret.al.,2017
TradeFreedom(HF_trade)
Trade-weightedaveragetariffrate–Nontarifftradebarriers(NTBs)
DISCRETEINTERVAL
0–100 186 1995-2017
Milleret.al.,2017:IndexofEconomicFreedom.HeritageFoundation(publiclyavailable)
TariffRates(Tariff_WITS)
100–MeanofEffectivelyApplied(AHS)andMost-FavoredNation(MFN)weightedaveragetariffrates
CONTINUOUSINTERVAL
0–100 168 1988-2016Owncalculations,2017(basedontariffdataof
WITSdatabank)
TariffRates(Tariff_RES)
100–Averageoftheeffectiverate(=tariffrevenue/importvalue)andtheaverageunweightedtariffrates
CONTINUOUSINTERVAL
0–100 44 1980-2004Jaumotteet.al.,2013
(publiclyavailable,basedonWTOdatabase)
FreedomtoTrade
Internationally(FTI_Index)
Indexbasedonfourcomponentsthatareweightedequallywithmax.pointsof10perarea;Thefinalscoreisaverageofthesumofthecategories:- Tariffs:–Revenuefromtradetaxes(%oftradesector)–Meantariffrate–Standarddeviationoftariffrates- Regulatorytradebarriers:–Non-tarifftradebarriers,–Compliancecostsofimportingandexporting- Blackmarketexchangerate- Controlsofthemovementofcapitalandpeople:–Foreignownership/investmentrestrictions–Capitalcontrols–Freedomofforeignerstovisit
CONTINUOUSINTERVAL
0–10 159
5-yearmeasure:1970-2000
Yearlydata2000-2015
Gwartneyet.al,2017:EconomicFreedomofthe
World:2017AnnualReport.FraserInstitute.
(publiclyavailable)
TRAD
E
DE-JURE
3060
9012
015
0Tr
ade
% G
DP
1970 1980 1990 2000 2010 2020Year
de-facto
020
4060
8010
0Tr
ade
Free
dom
1970 1980 1990 2000 2010 2020Year
de-jureTrade Openness
High complexity countries Moderate complexity countriesLow complexity countries
100
300
500
700
Fore
ign
tota
l sto
cks
% G
DP
1970 1980 1990 2000 2010Year
de-facto
2040
6080
100
KA O
PEN
1970 1980 1990 2000 2010Year
de-jureFinancial Openness
High complexity countries Moderate complexity countriesLow complexity countries
0.94 0.95 0.37 0.22 0.18 0.3 0.27 0.29 0.25 0.44 0.23 0.42 0.21 0.21 0.24 0.26 0.28 0 0.22 0.67 0.33 0.57
0.94 0.77 0.38 0.24 0.2 0.3 0.3 0.33 0.29 0.42 0.25 0.41 0.24 0.2 0.28 0.27 0.3 0.02 0.24 0.7 0.36 0.6
0.95 0.77 0.34 0.19 0.16 0.27 0.2 0.23 0.19 0.4 0.18 0.38 0.15 0.2 0.16 0.23 0.26 −0.02 0.17 0.55 0.27 0.48
0.37 0.38 0.34 0.61 0.57 0.71 0.11 0.11 0.13 0.2 0.15 0.25 0.13 0.43 0.69 0.78 0.77 0.72 0.66 0.55 0.82 0.78
0.22 0.24 0.19 0.61 0.69 0.65 0.06 0.05 0.11 0.16 0.14 0.23 0.14 0.52 0.51 0.6 0.62 0.52 0.43 0.38 0.68 0.63
0.18 0.2 0.16 0.57 0.69 0.79 −0.08 0.01 −0.05 0.05 −0.07 0.24 −0.06 0.17 0.37 0.43 0.41 0.36 0.22 0.24 0.6 0.54
0.3 0.3 0.27 0.71 0.65 0.79 0.24 0.26 0.2 0.19 0.23 0.29 0.26 0.42 0.49 0.56 0.58 0.5 0.36 0.38 0.61 0.58
0.27 0.3 0.2 0.11 0.06 −0.08 0.24 0.98 0.84 0.31 0.52 0.39 0.49 0.16 0.06 −0.01 0.07 0.25 0.18 0.22 0.04 0.16
0.29 0.33 0.23 0.11 0.05 0.01 0.26 0.98 0.73 0.24 0.65 0.35 0.66 0.16 0.05 −0.02 0.06 0.26 0.18 0.24 0.05 0.17
0.25 0.29 0.19 0.13 0.11 −0.05 0.2 0.84 0.73 0.24 0.74 0.33 0.75 0.15 0.24 0.37 0.35 0.27 0.18 0.15 0.15 0.19
0.44 0.42 0.4 0.2 0.16 0.05 0.19 0.31 0.24 0.24 0.96 0.99 0.98 0.25 0.15 0.19 0.14 0.12 0.15 0.36 0.18 0.31
0.23 0.25 0.18 0.15 0.14 −0.07 0.23 0.52 0.65 0.74 0.96 0.94 0.99 0.14 0.16 0.2 0.16 0.2 0.2 0.18 0.15 0.22
0.42 0.41 0.38 0.25 0.23 0.24 0.29 0.39 0.35 0.33 0.99 0.94 0.98 0.25 0.21 0.22 0.17 0.29 0.24 0.33 0.25 0.34
0.21 0.24 0.15 0.13 0.14 −0.06 0.26 0.49 0.66 0.75 0.98 0.99 0.98 0.14 0.18 0.35 0.32 0.27 0.2 0.13 0.14 0.19
0.21 0.2 0.2 0.43 0.52 0.17 0.42 0.16 0.16 0.15 0.25 0.14 0.25 0.14 0.46 0.53 0.41 0.64 0.59 0.39 0.49 0.5
0.24 0.28 0.16 0.69 0.51 0.37 0.49 0.06 0.05 0.24 0.15 0.16 0.21 0.18 0.46 0.78 0.8 0.8 0.53 0.41 0.68 0.65
0.26 0.27 0.23 0.78 0.6 0.43 0.56 −0.01 −0.02 0.37 0.19 0.2 0.22 0.35 0.53 0.78 0.85 0.88 0.48 0.45 0.68 0.67
0.28 0.3 0.26 0.77 0.62 0.41 0.58 0.07 0.06 0.35 0.14 0.16 0.17 0.32 0.41 0.8 0.85 0.74 0.45 0.45 0.65 0.65
0 0.02 −0.02 0.72 0.52 0.36 0.5 0.25 0.26 0.27 0.12 0.2 0.29 0.27 0.64 0.8 0.88 0.74 0.36 0.27 0.58 0.49
0.22 0.24 0.17 0.66 0.43 0.22 0.36 0.18 0.18 0.18 0.15 0.2 0.24 0.2 0.59 0.53 0.48 0.45 0.36 0.37 0.52 0.54
0.67 0.7 0.55 0.55 0.38 0.24 0.38 0.22 0.24 0.15 0.36 0.18 0.33 0.13 0.39 0.41 0.45 0.45 0.27 0.37 0.51 0.86
0.33 0.36 0.27 0.82 0.68 0.6 0.61 0.04 0.05 0.15 0.18 0.15 0.25 0.14 0.49 0.68 0.68 0.65 0.58 0.52 0.51 0.88
0.57 0.6 0.48 0.78 0.63 0.54 0.58 0.16 0.17 0.19 0.31 0.22 0.34 0.19 0.5 0.65 0.67 0.65 0.49 0.54 0.86 0.88
Trade_GDP
X_GDP
M_GDP
FTI_Index
HF_trade
Tariff_WITS
Tariff_RES
Total_stocks
Private_total_stocks
Portfolio_equity_stocks
FDI_inward_UNCTAD
FDI_inward_LMF
FDI_outward_UNCTAD
FDI_outward_LMF
FDI_Restrictions_OECD
KAOPEN
CAPITAL
FIN_CUR
KA_Index
HF_fin
KOF_defacto
KOF_dejure
KOF_econ
Trade_G
DPX_G
DPM_G
DP
FTI_Ind
ex
HF_trad
e
Tariff_W
ITS
Tariff_R
ES
Total_st
ocks
Private_
total_st
ocks
Portfoli
o_equit
y_stock
s
FDI_inw
ard_UNC
TAD
FDI_inw
ard_LMF
FDI_ou
tward_U
NCTAD
FDI_ou
tward_L
MF
FDI_Re
striction
s_OECD
KAOPEN
CAPITAL
FIN_CU
RKA_
IndexHF_
fin
KOF_de
facto
KOF_de
jure
KOF_ec
on
Correlation of all indices
Tradede-facto
Tradede-jure
Financialde-facto
Financialde-jure
Hybrid
MAIN FINDINGS OF CORRELATIONANALYSIS
Strong correla,on within four major groups¢
Weak/Moderate correla,on across dimensions:¢
Weak: £ trade dimension Weak: £ financial dimensionWeak: £ de-facto dimension Moderate: £ de-jure dimension
KOF¢ -Econ as the only real hybrid measure:
Moderate correla,on with all groups except de£ -facto financial