Comparing KOF & Kearney

LEARNING OBJECTIVES1. To identify the strengths and weaknesses of the KOF and Kearney

index

2. To evaluate which is the best index for showing Globalization

A. T. Kearney Index

• Broken into 4 categories

–Economic Integration–Personal Contact–Technological Connectivity–Political Engagement

A.T. Kearney - Economic

• Trade & Foreign Direct Investment (FDI)

A. T. Kearney - Personal

• Telephone traffic

• Travel

• Remittances and Personal Transfers

A. T. Kearney - Technological

• Internet Users

• Internet Hosts

• Secures Servers

A. T. Kearney – Political

• International Organizations• U.N Peacekeeping• Treaties• Government Transfers

A. T Kearney – How is it calculated?

• The lowest value is given a 0, the highest is given a 1 and then relative values are given to the ones in between.

• FDI, Internet and Telephone Traffic is weighted double

• All scores are then summarized

A. T Kearney Advantages

• It covers 96% of worlds GDP

• It covers 84% of worlds Population

• Allows for comparison between countries

• Allows for comparison over time

A. T Kearney - Disadvantages

• Only 64 Countries are included in the index

• Weightings – who decides?

• How do you measure cultural trends?

A. T Kearney Criticisms

• Smaller countries tend to take the top places in the index due to higher proportion/importance of FDI – therefore suggesting an over importance of the size of the country.

A. T Kearney - Response

• Not statistically significant

The KOF Index

• Measures globalization on economic, social and political dimensions.

• On a scale of 1-100. Higher values denote greater globalization.

• Variations in data are prevented from impacting the overall value by using principal components analysis to determine the weighting of the sub-indices.

The 3 indices of the KOF Index

• Economic Globalization: long distance flow of goods, capital and services and information.

• Subdivided into: 1. Actual flows (eg: FDI and trade as a % of GDP) 2. Restrictions: eg: tariffs and trade barriers)

• 37% weighting

The 3 indices of the KOF Index

• Social Globalization: expressed as the spread of ideas, images and people.

• 3 sub-indices are:• personal contact (eg international telephone

call and tourism)• Information flows (eg internet users per 1000

people and trade in newspapers as a % of GDP)• Cultural Proximity (eg number of McD’s)• Weighting: 39%

The 3 indices of the KOF Index

• Political Globalization: The diffusion of government policies.

• Sub-indices:• Membership of international organizations• Number of foreign embassies• Participation in international treaties

Points of Note with KOF Index

• The KOF Index of 2009 shows that globalization is still on the rise, driven by increased economic and political globalization, while social globalization stagnates.

• According to the KOF Index of Globalization 2009, Belgium is the world's most globalised country, although it is not on the top of any of the three dimensions

Advantages of KOF

• The index allows comparing degree and changes in globalization over a large number of countries and more than 30 years.

• The KOF Index of Globalization 2009 is available for 158 countries over the period 1970–2006,

• It is calculated on the basis of 24 variables.

Examination Questions:

• Describe how one prominent index measures global interaction.

• Explain how and why globalization may be measured.

• Evaluate the effectiveness of this measure in comparing the level of globalization of different countries.