KOF Globalisation Index
The KOF Globalisation Index is a composite measure developed and published annually by the KOF Swiss Economic Institute at ETH Zurich, quantifying the extent of globalization in 190 countries across economic, social, and political dimensions using a scale from 1 to 100, with data spanning from 1970 onward.[1] Originally conceived by economist Axel Dreher in 2006, the index aggregates 42 variables that distinguish between de facto indicators of actual international flows and interactions (such as trade volumes and personal contacts) and de jure measures of policies and institutional frameworks (such as trade restrictions and membership in international organizations).[2] Economic globalization, the index's largest component, evaluates trade openness, financial integration via foreign direct investment and portfolio flows, and related restrictions; social globalization assesses interpersonal contacts (e.g., migration and tourism), information flows (e.g., internet usage), and cultural exchanges (e.g., trade in cultural goods); while political globalization gauges involvement in international NGOs, embassies abroad, and treaties.[1][3] The index employs time-varying weights to reflect evolving global patterns, ensuring adaptability to structural shifts like rising financial interdependence, and has documented a general upward trend in globalization since the 1970s, accelerating after the Cold War but with recent stagnation in political dimensions amid geopolitical tensions.[2] A major revision in 2019 expanded variables from 23 to 42, separated trade and financial sub-indices, and emphasized bidirectional causal links between flows and policies, enhancing its empirical robustness for cross-country comparisons and time-series analysis.[3] In the latest 2022 data, the global average index value reached 60.80, signaling recovery toward pre-COVID-19 levels driven by rebounding economic trade in goods and services, though financial globalization weakened due to reduced investment stocks relative to GDP and social globalization lagged in areas like tourism.[4] Highly globalized nations such as the Netherlands (index value near 90) and Switzerland consistently rank at the top, reflecting dense trade networks and cultural openness, while deglobalization episodes—like Russia's sharp decline from sanctions—highlight the index's sensitivity to policy shocks.[4] Widely cited in academic research for its multidimensional approach, the index provides evidence-based insights into globalization's drivers and uneven distribution, countering narratives of uniform decline with data showing persistent, if regionally varied, integration.[1][3]Overview
Definition and Purpose
The KOF Globalisation Index is a composite measure developed by the KOF Swiss Economic Institute at ETH Zurich that quantifies the extent of globalization across economic, social, and political dimensions for nearly every country worldwide. It aggregates data from 42 variables, scaled on a 1-100 basis, to produce overall and sub-index scores, distinguishing between de facto globalization—reflecting actual cross-border flows such as trade volumes, migration rates, and international treaties ratified—and de jure globalization, which captures policy orientations like tariff levels, visa restrictions, and participation in international organizations.[1][4] The index's primary purpose is to enable systematic tracking of globalization trends over time, with annual data available from 1970 to 2021 across up to 195 countries, allowing for longitudinal analysis of how interconnectedness evolves in response to events like trade liberalization or geopolitical shifts. By providing a standardized, multidimensional framework, it facilitates empirical research into globalization's causal effects, such as its associations with economic growth, inequality, or institutional changes, as demonstrated in studies revisiting the index's construction to refine variable weights via principal component analysis.[1][4] Originally introduced by economist Axel Dreher in 2006, the index addresses limitations in prior globalization metrics by incorporating both quantitative flows and qualitative policies, thereby offering policymakers and scholars a robust tool for evidence-based assessments rather than relying on singular proxies like trade-to-GDP ratios. Its revisions, such as those in 2019, emphasize transparency in aggregation methods to enhance reliability for cross-country comparisons and hypothesis testing on globalization's real-world outcomes.[1][5]Core Dimensions
The KOF Globalisation Index comprises three core dimensions—economic, social, and political globalisation—each capturing distinct aspects of international integration. These dimensions are aggregated using principal component analysis to form sub-indices, which are then combined into an overall index with equal weights, distinguishing between de facto measures of actual flows and activities and de jure measures of policies and formal commitments.[1][6] Economic globalisation assesses the intensity of cross-border economic linkages, subdivided into trade and financial globalisation sub-indices. The trade sub-index includes de facto variables such as trade in goods and services as a percentage of GDP and trade partner diversification (measured via the inverse Herfindahl-Hirschman index), alongside de jure elements like tariffs, trade taxes as a percentage of revenue, and non-tariff barriers including compliance costs. Financial globalisation incorporates de facto indicators like foreign direct investment stocks, portfolio investment, international debt, and income payments as percentages of GDP, with de jure proxies such as investment restrictions and capital account openness indices (e.g., Chinn-Ito index). This dimension reflects both actual economic exchanges and the regulatory frameworks facilitating them, with data standardized to account for country size differences.[6] Social globalisation evaluates interpersonal, informational, and cultural exchanges, divided into three sub-indices. Personal contacts cover de facto metrics like international voice traffic minutes per capita, remittances per capita, international tourism as a percentage of population, and migration stocks, plus de jure factors such as visa requirements, telephone subscription rates, and international airports per capita. Information flows include de facto patent applications and international students per capita, and de jure measures like internet users, press freedom, and bandwidth per capita. Cultural proximity tracks de facto trade in cultural goods, trademark applications, and presence of global brands (e.g., McDonald's restaurants or IKEA stores per capita), with de jure indicators including television penetration, education expenditure, and gender parity in schooling. These elements quantify the diffusion of ideas, people, and cultural artifacts beyond national borders.[6] Political globalisation measures the degree of international political engagement, encompassing de facto participation such as the number of embassies in a country, personnel in UN peacekeeping missions per capita, and memberships in international NGOs, alongside de jure commitments like the number of international organization memberships, treaties ratified since 1945, and bilateral investment treaty partners. Unlike the other dimensions, it lacks explicit sub-indices but emphasizes formal diplomatic networks and supranational involvement, capturing how states embed themselves in global governance structures.[6]History
Origins at KOF Swiss Economic Institute
The KOF Globalisation Index was developed at the KOF Swiss Economic Institute, an applied economic research unit affiliated with ETH Zurich, to quantify the multifaceted nature of globalization through empirical indicators spanning economic, social, and political domains.[1] The index's creation addressed a gap in prior measures, such as the Center for the Study of Globalisation and Regionalisation's index covering 1982–2004, by incorporating a broader set of variables and distinguishing between actual flows (de facto) and policy stances (de jure).[7] Economist Axel Dreher, then affiliated with KOF, conceived and constructed the initial version of the index, which was first published in 2002 and provided data for 122 countries from 1970 onward.[8] [9] This inaugural release emphasized economic globalization through trade and capital flows, while laying groundwork for later inclusions of social and political aspects, reflecting KOF's focus on data-driven analysis of international integration.[1] The index's formal academic introduction followed in Dreher's 2006 peer-reviewed paper, which empirically tested its relationship to economic growth using the 1970–2000 dataset, confirming positive associations after controlling for endogeneity.[1] Early iterations aggregated 23 variables into sub-indices, weighted by principal component analysis to avoid arbitrary assignments, ensuring the measure's robustness against subjective biases in globalization assessment.[6] KOF's institutional resources, including access to global datasets from sources like the World Bank and IMF, enabled this pioneering effort, positioning the index as a standard for cross-country comparisons.[10]Major Revisions and Updates
The KOF Globalisation Index underwent its first significant update in 2008, as detailed in Dreher et al.'s analysis, which refined variable selection and aggregation while maintaining the original structure introduced in 2006, covering data from 1970 onward for over 200 countries.[6] This update incorporated additional data sources and minor adjustments to weights but did not alter core dimensions or introduce new measurement distinctions.[11] A major methodological overhaul occurred in 2019, published by Gygli et al., expanding the index from 23 to 43 variables and distinguishing between de facto measures (reflecting actual international flows and activities, such as trade volumes and migrant stocks) and de jure measures (capturing policies and institutional conditions, like tariff rates and international treaty memberships).[3] This revision disentangled the economic dimension into separate trade and financial sub-indices, with trade encompassing flows and restrictions (e.g., tariffs, non-tariff barriers) and finance including capital account openness and international investment agreements.[7] The social dimension was broadened to include cultural proximity indicators, such as trade in cultural goods and international trademark applications, replacing outdated proxies like international mail flows.[5] Aggregation methods were also revised to use time-varying weights derived from principal component analysis over 10-year rolling windows, allowing the index to adapt to evolving patterns in globalization data rather than relying on fixed weights from earlier versions.[12] These changes enhanced the index's granularity and responsiveness, enabling separate tracking of policy-driven (de jure) versus outcome-based (de facto) globalization, with initial coverage extended to 2016 and annual data updates thereafter.[1] No further structural overhauls have been documented since 2019, though the KOF Swiss Economic Institute continues yearly refinements to incorporate new data, ensuring consistency in the revised framework.[1]Methodology
Sub-indices and Variable Selection
The KOF Globalisation Index is structured around three core dimensions—economic, social, and political globalization—with variables aggregated into de facto sub-indices measuring actual cross-border flows and interactions, and de jure sub-indices capturing policies, regulations, and institutional frameworks that facilitate or restrict globalization.[1] The revised methodology, implemented in the 2018 update and detailed in Gygli et al. (2019), employs 43 individual variables organized into five principal sub-indices: trade and financial flows under economic globalization; interpersonal, informational, and cultural exchanges under social globalization; and political engagement as a distinct dimension primarily emphasizing de jure elements like international treaties alongside limited de facto indicators such as embassy networks.[5] This structure allows for granular assessment while enabling aggregation to overall dimension scores and a composite index.[1] Economic globalization sub-indices focus on trade (de facto variables including exports and imports of goods and services as percentages of GDP, and trade partner diversification to account for network breadth) and financial integration (de facto measures like inward and outward foreign direct investment stocks relative to GDP, portfolio investment, and international investment positions; de jure elements such as the Chinn-Ito financial openness index and investment restrictions).[5] Social globalization sub-indices encompass interpersonal contacts (de facto indicators like personal international voice traffic, student and migrant flows adjusted for population), informational flows (de facto international internet bandwidth and de jure press freedom indices), and cultural proximity (de facto trade in cultural goods, student exchanges, and indicators of global cultural consumption such as IKEA and McDonald's outlets per capita).[5] Political globalization, treated as a single sub-index, integrates de jure variables on participation in international organizations (e.g., UN missions, treaty memberships) and de facto embassy presence abroad, reflecting diplomatic interconnectedness without heavy reliance on flows due to the dimension's policy-centric nature.[5] Variable selection prioritizes empirical relevance to multi-continental linkages, excluding purely regional interactions to isolate true globalization effects, and incorporates size adjustments (e.g., flows normalized by GDP or population) to ensure comparability across countries.[5] Criteria emphasize causal proxies for openness, such as diversification indices to capture partner spread beyond mere volume, while reclassifying certain original variables (e.g., internet access from de facto to de jure) for conceptual accuracy; data availability and time-series consistency guide inclusions, drawing from sources like the World Bank, IMF, and bilateral matrices for robustness.[5] This approach, refined from the original 2002 index's 23 variables, enhances transparency and reduces multicollinearity through principal component analysis in aggregation.[1]De Facto Versus De Jure Measurement
The KOF Globalisation Index incorporates a distinction between de facto and de jure measurements to separately quantify actual international flows and the enabling policy frameworks, recognizing that legal openness does not always translate into realized activity due to factors such as enforcement gaps, economic constraints, or geopolitical barriers. De facto globalization captures observable cross-border interactions, such as trade volumes or migrant stocks, while de jure globalization evaluates formal institutions, including tariff schedules or treaty ratifications. This bifurcation, implemented in the index's 2018 revision, permits the construction of parallel sub-indices for economic, social, and political dimensions, with the overall index derived as the unweighted average of the de facto and de jure aggregates.[5] In the economic dimension, de facto indicators include exports and imports of goods and services as percentages of GDP, along with gross inflows and outflows of foreign direct investment (FDI) relative to GDP, portfolio investment stocks, and international investment income flows; these metrics directly gauge transactional intensity. Conversely, de jure economic measures assess policy-induced openness, such as mean tariff rates on imports, prevalence of taxes on international trade, and the number of free trade agreements or currency unions in effect, which reflect regulatory barriers or facilitators without necessarily implying equivalent activity levels.[5][1] The social dimension applies the distinction to interpersonal connectivity: de facto variables encompass international voice telephone traffic, outbound tourism expenditures relative to GDP, and the stock of immigrants and foreign population as shares of total population, indicating empirical cross-border exchanges. De jure social globalization proxies policy environments through indicators like mobile phone subscriptions per 1,000 people and internet users per 1,000 people, which signal infrastructural and regulatory preconditions for global integration, though they may overestimate potential if adoption lags due to socioeconomic factors.[5] For the political dimension, de facto measures track participation in international activities, including the number of embassies hosted, personnel contributions to UN Security Council missions, and memberships in international non-governmental organizations (INGOs). De jure political indicators focus on institutional commitments, such as ratifications of international treaties on peacekeeping, environmental protection, human rights, and trade, alongside participation in international organizations, highlighting formal alignment over substantive engagement. This separation addresses empirical evidence that de jure openness correlates differently with outcomes like growth compared to de facto flows, as de jure policies may create latent potential unrealized amid domestic resistance or external shocks.[5]Data Sources and Aggregation Process
The KOF Globalisation Index draws on data from a range of international organizations and databases to construct its 43 variables, covering the period from 1970 to 2021 for up to 195 countries. Economic variables primarily source from the World Bank World Development Indicators (WDI) for trade flows, services, and income payments; the IMF's Direction of Trade Statistics (DOTS) and Balance of Payments Statistics (BOPS) for partner diversity and cultural services; Lane and Milesi-Ferretti's external wealth of nations dataset and IMF International Investment Position (IIP) for FDI, portfolio investment, and international debt; and UNCTAD for investment agreements and treaty partners.[13] Social variables include International Telecommunication Union (ITU) data for voice traffic, internet bandwidth, and subscriptions; World Bank WDI for tourism, students, transfers, patents, high-tech exports, television access, and gender parity; Czaika et al.'s migration estimates and IATA for migration and visa policies; ICAO for airports; UN Comtrade for cultural goods; and McDonald's and IKEA corporate reports for restaurant and store counts.[13] Political variables rely on the Europa World Yearbook for embassies, UN peacekeeping data, Yearbook of International Organizations for NGOs, CIA World Factbook for intergovernmental organizations, and United Nations Treaty Collection for treaties.[13] De jure variables incorporate indices like Gwartney et al.'s Economic Freedom of the World for trade and investment regulations, Chinn-Ito for capital account openness, and Freedom House for press freedom and civil liberties.[13] Variables are distinguished as de facto (measuring actual flows and interactions, such as trade volumes or migrant stocks) or de jure (capturing policies and institutional openness, such as tariff rates or treaty memberships), with the revised 2018 methodology explicitly separating these to better reflect both realized and potential globalization.[5] Data imputation addresses missing values using interpolation or nearest available observations, ensuring continuity across time series.[5] In the aggregation process, individual variables are first normalized to a 1–100 scale via panel normalization, where each observation is ranked by percentile relative to the maximum value observed across all countries and years in the sample, allowing for time- and country-specific scaling without assuming stationarity.[5] Weights for variables within each of the five sub-dimensions (trade and financial globalization under economic; interpersonal, informational, and cultural under social; and a single political dimension) are derived dynamically using polychoric principal component analysis (PCA) applied to a 10-year rolling window of data, capturing evolving correlations and emphasizing explanatory variance over fixed geometric means from prior versions.[5] Sub-indices are computed as weighted sums of their constituent variables; these are then equally weighted and averaged to form the three main dimensions (economic, social, political), with the economic dimension treating trade and financial sub-indices at 50% each.[5] De facto and de jure indices are aggregated separately following this hierarchy, and the overall KOF Globalisation Index is the simple unweighted average of the de facto and de jure totals, yielding a composite score from 1 to 100.[5] This bottom-up approach, revised in 2018 from the original 2002 index's 23 variables and static weights, enhances adaptability to structural shifts like financial liberalization while maintaining transparency through published variable definitions and code availability on the KOF website.[1][5]Key Findings
Long-Term Global Trends
The KOF Globalisation Index, which quantifies globalization across economic, social, and political dimensions on a scale from 0 to 100, has exhibited a sustained upward trend in its global average since 1970, indicating progressively deeper international integration. The world average stood at approximately 38.4 points in 1970, rising to 41.8 by 1980 and 43.6 by 1990, with acceleration following the Cold War's end, driven by expanded trade liberalization, capital flows, and multilateral agreements.[1][14] By 2020, the average had reached around 65 points, reflecting cumulative effects of technological advancements, reduced barriers, and rising cross-border interactions, though coverage varies by country and year due to data availability.[1] Economic globalization, encompassing trade, investment, and financial flows, has shown the most pronounced long-term growth, with de facto measures like exports and foreign direct investment (FDI) inflows expanding markedly post-1990 amid WTO expansions and supply chain globalization. Social globalization, tracked via personal contacts, information flows, and cultural exchanges, has paralleled this rise, fueled by migration surges and digital connectivity, though de jure restrictions in some nations tempered absolute gains. Political globalization, measured by participation in international organizations and treaty memberships, increased steadily from the 1970s, peaking in the early 2000s as supranational bodies proliferated, but has since plateaued in some regions due to sovereignty assertions.[5][1]| Decade | Approximate World Average KOF Index |
|---|---|
| 1970s | 38–42 |
| 1980s | 42–45 |
| 1990s | 45–50 |
| 2000s | 50–55 |
| 2010s | 55–62 |
| 2020s (to 2022) | 62–65 |
Recent Developments and Post-Pandemic Recovery
The KOF Globalisation Index experienced a decline during the height of the COVID-19 pandemic in 2020, followed by a moderate rebound in 2021, though the overall global index remained below pre-pandemic 2019 levels due to persistent disruptions in trade, travel, and international cooperation.[16] Economic globalisation showed early signs of recovery in 2021, driven by de facto increases in merchandise trade amid post-lockdown consumer demand for goods, while trade in services lagged and financial integration weakened from market volatility.[16] Social globalisation, however, declined slightly in 2021, with stagnation in tourism, personal contacts, and migration offset partially by growth in digital connectivity.[16] Political globalisation continued a pattern of moderate expansion, supported by de jure measures such as participation in international organizations.[16] By 2022, the index indicated a stronger recovery trajectory, approaching pre-2019 peaks as pandemic restrictions eased globally.[4] Economic globalisation led the resurgence, with robust growth in trade flows for goods and services alongside rising foreign direct investment, reflecting revitalized supply chains and investment confidence.[4] Social globalisation improved modestly through enhanced de jure international agreements and de facto cross-border exchanges, though it stayed below 2019 benchmarks amid lingering effects on mobility and cultural interactions.[4] Political globalisation, in contrast, stagnated, hampered by de facto reductions in diplomatic engagements and heightened geopolitical frictions, such as those following Russia's invasion of Ukraine, which contributed to sharper declines in countries like Russia due to sanctions and expatriate withdrawals.[4] These post-pandemic developments underscore a uneven recovery, with economic dimensions rebounding faster than social or political ones, influenced by both policy reopenings and external shocks like trade policy shifts and conflicts.[4][16] While the overall trend points to resilience in global interdependencies, full restoration to pre-COVID trajectories remains contingent on sustained trade liberalization and geopolitical stability.[4]Country Rankings and Variations
The KOF Globalisation Index consistently ranks small, open European economies at the top of overall globalisation scores, reflecting high levels of trade integration, foreign direct investment, and cross-border flows. In the 2022 dataset, the Netherlands achieved the highest overall score of 89.72 out of 100, followed closely by other Western European nations such as Switzerland (89.58) and Belgium (88.90).[17] These rankings underscore the index's emphasis on de facto measures like trade volumes and actual migration patterns, where proximity to major markets and institutional openness amplify scores. At the opposite end, Somalia recorded the lowest score of 30.26, attributable to limited international trade, political instability, and minimal cultural exchanges, highlighting how conflict and geographic isolation constrain globalisation.[17]| Rank | Country | Overall Score (2022) |
|---|---|---|
| 1 | Netherlands | 89.72 |
| 2 | Switzerland | 89.58 |
| 3 | Belgium | 88.90 |
| 4 | Austria | 87.95 |
| 5 | Sweden | 87.69 |
| ... | ... | ... |
| Last | Somalia | 30.26 |