DHL Global Connectedness Index 2014

DHL Global Connectedness Index 2014
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For most of the period since World War II, globalization
posted steady increases. But today, we find ourselves in an
age of ambiguity. Some exult about “hyperglobalization,” 1
with one source predicting that global flows could triple
by 2025. 2 But others worry that the “age of globalization”
that defined the last few decades may have ended and
started going into reverse. 3 This ambiguity adds to the
importance of measuring globalization.
The DHL Global Connectedness Index—the most up-todate
of the established globalization indexes—reveals a
more nuanced reality. During 2013, the depth of globalization
resumed its upward march as international flows
grew faster, on average, than their domestic counterparts.
The breadth of globalization, however, continued its
multiyear slide as the changing geographic distributions of
advanced economies’ international flows lagged the shift
of economic activity to emerging economies. 4
This chapter begins by explaining how the DHL Global
Connectedness Index measures globalization—what we
summarize as a 3-D approach, focused on depth, distribution,
and directionality—and how that relates to theoretical
discussions of the phenomenon. It then describes the
current state of globalization and trends since 2005. Finally,
the trends revealed by the DHL Global Connectedness
Index are contrasted with findings from other research on
the topic to highlight the distinctive features of this index.
Measuring Globalization in 3-D
Global connectedness is defined in this report as the depth
and breadth of a country’s integration with the rest of the
world as manifested by its participation in international
flows of products and services, capital, information, and
people.
Depth measures how much of an economy’s activities or
flows are international versus domestic by comparing the
size of its international flows (and stocks cumulated from
prior year flows) with relevant measures of its domestic
activity. For example, to assess the depth of Hong Kong
SAR 5 (China)’s merchandise exports, its exports are compared
to its GDP: Hong Kong’s merchandise exports-to-
GDP ratio is 196%, the highest in the world and 50 times
higher than Burundi’s (the lowest—only 4%).
Breadth complements depth by looking at how broadly
the international component of a given type of activity is
distributed across countries. To illustrate the importance
of incorporating breadth into assessments of global connectedness,
consider inbound tourism in the Bahamas.
While the Bahamas ranks second in the world in terms
of the number of inbound tourists per capita (a depth
metric), more than 80% of those tourists come from the
United States. Thus, while depth of inbound tourism in the
Bahamas is high, its breadth is limited, especially when one
notes that less than 10% of outbound international tourists
worldwide come from the United States.
The DHL Global Connectedness Index measures breadth,
as suggested by the example of tourism in the Bahamas,
by comparing the distribution of a country’s international
flows (inbound tourists in this example) with the global
distribution of the same flow in the opposite direction (outbound
tourists). If the Bahamas attracted tourists from all
around the world in proportion to where all of the world’s
outbound tourists come from, the Bahamas would have
the highest possible breadth score. In contrast, if all of the
Bahamas’s tourists came from just one country that sends
tourists nowhere else, it would receive the lowest possible
breadth score.
This method of measuring breadth is an attractive basis
for comparing countries because scores are not biased by