DHL Global Connectedness Index 2014

DHL Global Connectedness Index 2014
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The expanding international interactions of emerging
economies are reshaping the geography of global connectedness.
Breadth—particularly in advanced economies—
is on a declining trend. The distributions of advanced
economies’ international interactions have not kept up
with the shift of economic activity to emerging economies.
This, to some extent, reflects the effects of distance and
cross-country differences that have always restrained
international interactions. However, it also suggests that
advanced economies may be missing out on growth opportunities
in emerging markets.
Even as breadth has declined, however, the average distance
traversed by the flows and stocks measured on the
DHL Global Connectedness Index has increased. In 2005, the
weighted average distance traversed by all of the components
of the index was 4,647 kilometers (2,888 miles). By
2013, their average distance had increased 6% to 4,904 kilometers
(3,047 miles). The proportion of interactions taking
place within regions has also declined, and countries’ flows
and stocks have become spread out more evenly across
partner countries (their concentration has fallen). These
measures—which unlike breadth capture absolute changes
rather than changes relative to the theoretical benchmark
of a world in which distance doesn’t matter—point to international
interactions becoming more rather than less global.
This chapter first introduces measures of the distributions
of countries’ international interactions and relates them
to the shift of economic activity to emerging economies.
Then, changes since 2005 on each of the measures are
examined at the level of individual index components.
The chapter then highlights a set of differences between
advanced and emerging economies that can help to understand
why breadth is declining in advanced economies. It
concludes with a brief discussion of what business leaders
and policymakers in those economies could do to broaden
their countries’ global connectedness.
A Growing and Shifting Globe Reshapes Global
Connectedness
Measures of the distributions of countries’ international
interactions complement the depth measures presented
in the previous chapter. They represent the second leg of
the 3-D (depth, distribution, directionality) approach to
measuring globalization described in Chapter 1. Depth
measures indicate that only a small proportion of the interactions
that could take place either within or across borders
are international. Distribution measures take the essential
next step of examining the extent to which the interactions
that do cross national borders are globally distributed.
As complex and multi-dimensional phenomena themselves,
the distributions of countries’ international interactions
among partner countries can be measured in
a variety of ways, and different measures can move in
different directions. This chapter begins with and gives
primary emphasis to the breadth measure that is used in
the calculation of the DHL Global Connectedness Index.
Then, alternative measures are also provided to round out
a more complete picture of the changing distributions of
countries’ international interactions. Since these shifts have
not previously been analyzed, the treatment is, inevitably,
somewhat complex.
Breadth measures the distributions of countries’ international
interactions among partner countries relative to
what those distributions would be in a world where crosscountry
differences and distances had no impact at all.
A country would earn the highest possible breadth score
for exports, for example, if its exports were distributed
among destinations in exact proportion to the rest of the
world’s imports. At the opposite extreme, if all of a country’s
exports were destined for a single country that did not
import from any other country, it would receive the lowest
possible breadth score.