KOF Index of Globalization – Its dimensions and their importance for a

nation

Globalization is defined by the KOF as "the process of developing network of connections

among individuals over multi-continental dimensions, facilitated by a range of activities
including people,capital and products, information and ideas." Globalization is conceived as "a
phenomenon that liberalizes national borders, merges national economies, cultures, technology,
and governance, and creates complex interdependent relationships."

Since 1970, the KOF Globalization Index has measured the countries on the basis of 3
dimensions - Economic, Social, and Political globalisation.

Dimensions Under KOF Index of Globalization:

The three dimensions of globalisation identified by the KOF Globalization Index are economic,
social, and political. Trade and financial globalisation are subdivided under economic
globalisation. Interpersonal, informational, and cultural globalisation are subdivided under social
globalisation.

Dimensions
of KOF Index
of
Globalization

Economic Social
Political
Globalization Globalization
Globalization

Trade Financial Interpersonal Informational Cultural

Globalization Globalization Globalization Globalization Globalization
These three dimensions are used to track changes in the amount of globalisation of various
nations over time. The current KOF Globalisation Index covers the period between 1970 to 2016
and it includes 195 nations. In the overall score, as well as in the economic, social, and political
dimensions, the index distinguishes between de facto and de jure globalisation. On a scale of 1 to
100, the index measures globalisation. There are 42 different variables that are combined based
on statistically computed weights (principle component analysis).’

Top 5 Countries in the Globalization Index – by KOF 2021

Source - https://kof.ethz.ch/en/forecasts-and-indicators/indicators/kof-globalisation-index.html

India is at 96th place with a 62.48 overall index score in 2021

The KOF Globalization Index has been revised to include a differentiation between de facto and
de jure globalisation at each dimension and level of the index. This structure calculates a
different index for de facto and de jure economic, social, and political globalisation   A different
index for de facto and de jure economic, financial, interpersonal, informational, and cultural
globalisation is calculated at the sub-dimensional level. Because all of those indices are
published, the index and its sub-indices may be used in a variety of empirical contexts.
 A) ECONOMIC DIMENSION

The subdivision of economic globalisation contains both trade and financial globalisation.

1) Trade globalization

 De facto trade globalisation is determined based on trade in goods and services.

 De jure trade globalisation includes taxes, custom duties and trade restrictions.

Variables that measure the exchange of goods and services over vast distances are
included in trade globalisation. It uses  the sum of  exports and imports (of goods) as a
proportion of Gdp, the sum of exports and imports(of services) as a proportion of Gdp,
and a variable that quantifies goods trade partner diversity.

2) Financial globalization

 De facto financial globalisation include foreign investment in categories.

 De jure financial globalization include investment restrictions and international
investment agreements.

Capital flows and inventories of foreign assets and liabilities are used to assess financial
globalisation. As a result, KOF use a quantity-based measure of financial globalisation rather
than a price-based or news-based measure. The following variables are included for assessing
globalisation: The stock of assets and liabilities of FDI as a share of Gdp, the stock of assets and
liabilities of international equity portfolio investments as a proportion of Gdp, the stock of
inward and outward stocks of international portfolio debt securities, bank loans and deposits as a
percentage of GDP, and international reserves excluding gold as a percentage of GDP.
Why Economic Dimension is Important ?

 Trade Globalization is important because-

The greater the value of the variable, the more scattered a country's trading is among
different trading partners. As a result, the variable favours nations with a worldwide export
and import structure over those that primarily trade regionally.

 Financial Globalization is important because-

It includes profits and payments resulting mostly from cross-border labour and capital provision.
It contains data on the composition of a large sample of nations' international financial positions.

Therefore, Economic Dimension is important for a nation as it demonstrates globalized trade and
financial position of a country. If all the variables under this dimension are achieved by a
country, then that particular nation has can score well in the KOF globalized Index which depicts
the proportion rate of globalization of that country among the others.

B) SOCIAL DIMENSION

The social globalisation comprises of three segments, each with its own de facto and de jure
segment.

1) Interpersonal Globalization

It is calculated using international telephone connections, tourist numbers, and migration

inside the de facto section. It is quantified with reference to telephone subscriptions,
international airports, and visa limitations within the de jure section.
 It use four factors to assess de facto interpersonal globalisation: international voice
traffic, international money transfers, international tourism, and the proportion of foreign-
born people.

2) Informational Globalization

It is calculated in the de facto section based on international patent applications, foreign

students, and high-tech goods trade. The de jure portion assesses television and internet
access, as well as press freedom and foreign internet connectivity.

Three factors are used to assess informational globalisation. The first two are the number
of non-resident patent applications and the total number of inbound and outgoing foreign
students. They symbolise worldwide technology, scientific knowledge, and information
flows. Exports of high-tech items divided by population will be the third variable. It
serves as a symbol of technical and scientific knowledge flowing outward. 

3) Cultural Globalization

Trade in cultural goods, foreign trademark registrations, and the number of McDonald's
and IKEA stores are all used to calculate it in the de facto section. Modern cultural
globalisation is generally defined as the diffusion of American values in the de jure
sector, which emphasises on civil rights (freedom of people), gender equality, and public
investment on school education. The number of McDonald's restaurants in a nation was
used to calculate it. In the 2007 edition of the index, the emphasis on American ideals
was loosened by incorporating the number of IKEA shops and book commerce as new
criteria. It also includes the number of trademark applications filed by non-residents.
Why Social Dimension is Important ?

 Interpersonal Globalization is important because-

The total of mobile phone and telephone subscriptions per 100 individuals is the first variable.
Cross-border movement accounts for a significant quantity of de facto personal contact.
Incorporating a measure that facilitates these migrations contributes to a more comprehensive
view of de jure interpersonal globalisation. The variable freedom of foreigners to visit is also
taken into account. The proportion of nations for which a country requires a visa for international
visitors is used to calculate it.

 Informational Globalisation is important because-

It is determined by the number of televisions in each home and the number of people who have
access to the internet per each household. Furthermore, it assesses the internet's importance in
facilitating electronic information sharing. It encapsulates the greatest capability for users to
obtain information from other countries. The press freedom index also takes into account the
availability of news-related information. Its goal is to depict media independence and analyse the
degree of freedom in print, broadcast, and internet media.

 Cultura Globalisation is important because-

It emphasises the importance of countries in measuring the development of rationalism's shared

principles and, as a result, cultural assimilation over the world. It measures the significance of
education by looking at overall government spending on education as a proportion of GDP. On
gross primary school enrolment, it uses the gender parity index. It is a powerful predictor of men
and women's equality since it reflects the parity of boys and girls. The civil freedom index, a
ranking of civil freedoms released in the freedom of the world report, is also included. It
measures civil liberties such as freedom of expression and religion, associational and
organisational rights, rule of law, personal autonomy, and individual rights. These and other
cultural aspects influence whether citizens of a nation have access to values and beliefs, which
are key parts of culture, from other countries.
 C) POLITICAL DIMENSION

The de facto segment of political globalisation is evaluated by the number of embassies and
international non-governmental organizations (NGOs), as well as involvement in United Nations
peacekeeping operations. Variables focusing on participation in international organizations and
international treaties make up the de jure segment.

Why Political Dimension is Important?

Political globalisation is evaluated by the number of embassies and involvement in UN

peacekeeping missions. The existence of embassies means that foreigners are engaged in the
interests of their own nations. As a result, it is a measure of a government's willingness to accept
foreign sovereign political influence and resources. It also includes the variable number of non-
governmental organisations (NGOs) functioning in a given nation. The presence of NGOs in
one's own region entails the presence of foreigners with political or social objectives, which
might be viewed as foreign political influence. The number of multilateral treaties negotiated
since 1945, as well as participation in international organisations, are included. Having the same
number of treaties with smaller partners suggests strong individual relationships rather than a
desire to form global political networks.