DHL Global Connectedness Index 2014

12 1. How Globalized is the World
Figure 1.1
Global Depth Ratios, 2013 or most recent year available 6
Trade
Capital
Information
Trade (Gross Exports % of GDP)
FDI Flows (% of Gross Fixed Capital Formation)
Portfolio Equity Stocks (% of Mkt Cap)
Internet Traffic (Int’l % of Total)
Telephone Calls (Int’l % of Total)
Migrants (% of Population)
People
Students (Int’l % of Univ. Students)
Tourists (Int’l % of Total Arrivals)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Global depth ratios show that far more of every type of activity studied that could take place either within or across national borders is domestic,
not international. In most cases, the international share of total activity is less than 10%–20%.
where countries are located. However, breadth is just one
way of summarizing the distribution of countries’ international
interactions. Such distributions can be summarized
in multiple ways, with those summary measures sometimes
moving in different directions. We therefore supplement
our breadth measure with alternate measures of distribution:
concentration of interactions in a small number of
partners, average distance traversed by international interactions,
and regionalization (as in the intra-regional share
of international interactions). 6
In addition to depth and distribution/breadth, the third D
underlying our “3-D” approach to measuring globalization
is directionality. Inbound and outbound flows may differ
qualitatively in their significance. Consider international
education, which is where we observe the largest differences
between countries’ inward and outward flows. Compare,
for example, Australia, where 22% of university students
come from abroad but less than 1% have left to study
overseas with Botswana where 50% of students are studying
abroad but only 4% of students in domestic universities
come from outside the country. Those data clearly paint
very distinct pictures of the two countries’ tertiary education
systems.
We do not fold directionality into our aggregate measures
of global connectedness. Rather, we report it alongside
depth and breadth (in the country profiles at the end of
this report) to call attention to the kinds of distinctions
highlighted by the preceding comparison of Australia and
Botswana. Reporting directionality separately also lets
us use it as a diagnostic in relation to depth and breadth.
When a country, for example, has much higher inward
than outward depth, it may make more sense to focus on
boosting depth on the outward direction.
It is worth adding that the dimensions of depth, distribution,
and directionality build on, but also depart significantly
from, widely-used theoretical definitions of globalization
(see the boxed insert, “Defining Globalization”).
So while our objectives in this report are primarily empirical,
it has significant theoretical implications as well.
The DHL Global Connectedness Index looks along these
dimensions at 12 types of interactions that can be grouped
into four pillars. The trade pillar covers flows of goods
and services. 7 The capital pillar focuses on equity capital:
flows and stocks of foreign direct investment and portfolio
equity. Debt capital is excluded because of the dangers
associated with high levels of international indebtedness—the
inclusion of flows whose risks might outweigh
their benefits would cloud the orienting function (higher
better than lower) of the depth dimension of the index. 8
The information pillar incorporates data on international
internet bandwidth, international telephone calls, and
trade in printed material. 9 The people pillar measures
people movements across three time-horizons: migration
(long-term), university students pursuing degrees abroad
(medium-term), and tourism (short-term). 10
Global Connectedness in 2013
This section summarizes the depth and breadth of global
connectedness in 2013, and the next section tracks how
they have evolved since 2005. Directionality will be