The KOF Index of Globalisation

The KOF index of Globalisation is a system which ranks nations regarding globalisation basing on the following three dimensions; 

Economic, 

Social, and 

Political. 

The overall indices, as well as sub-indices, are calculated alluding to 

Actual economic flows and Restrictions, 

Data on the flow of information, 

Personal contact data, and 

Cultural proximity data. 

The overall index of globalisation covers the economic, social and political dimensions. Globalisation refers to the process of establishing networks of links between actors at multi-continental distances, facilitated by diversity which includes people, information, wealth, and properties (Gygli, Haelg, Sturm, 2018). Globalisation is conceptualised as a process which dissolves governmental restrictions, incorporates national economies, know-how, governance, and culture and produces complex relations of joint interdependence. 

The three dimensions of the KOF index are defined as; 

Economic globalisation: categorised as flows of capital, goods, and services and information and ideas that go along with market exchanges. 

Political globalisation: This is characterised by the diffusion of government policies, and 

Social globalisation: characterised by the spread of information, ideas, people, and images. 

Factors Considered when Computing Components of KOF Index for Globalisation. 

Economic Globalisation 

Data on actual flows 

Foreign Direct Investment : Total of FDI stock both inward and outward. Calculated as a percentage of GPD. 

Trade (% GDP): Total exports and imports of products and services. They are measured as a part of GPD which are calculated in percentages. 

Income Payments to Foreign National: Compensations to employees paid to workers who non-resident. However, incomes which are generated from assets which are intangible are excluded. 

Data on restrictions 

Taxes and International Trade : Taxes from international trades. These trades are export duties, import duties, import monopolies, exchanges taxes, and exchanges profits. It also includes recoveries, fees, fines, inheritance taxes, and non-current levies. 

Hidden Import Barriers : This index is majorly centred on the Global Competitiveness Reports. The ability to compete in the domestic market is mostly reduced by tariff and non-tariff barriers. 

Capital Account Restrictions : Access of citizens to foreign capital, foreign ownership of companies in your nation is limited, and most prohibited from some sectors. This index is based on annual report produces by IMF on exchange restrictions and exchange arrangements. 

Social Globalisation 

Data on Personal Contact 

International Tourism : Total number of international tourist who arrives and departs as a proportion of total population. 

Telephone Tariff: Total of international outgoing as well as incoming calls which are fixed. 

Transfers: Total inflows and outflows of income, goods, and services. 

Foreign Population : the population of foreigners or foreign-born people in the nation. The data is provided as a percentage of the entire population. 

Per Capita International Letters: the total amount of letters sent and received from abroad. 

Data on Information Inflows 

Data on Cultural Proximity : Per capita number of McDonald’s Restaurants 

Internet Users: People with access to the global internet. 

Trade in Books: Total number of books imported and exported (% GDP). The UN World Trade Annual publishes data. 

Television: Ratio of households with TVs (per 100 persons). 

Political Globalisation 

Membership in International Organisation: Total number of the nation’s association with worldwide organisations. 

Embassies in Country: Total number of embassies a nation has. 

International Treaties: Documentation which signed among two nations or more and approved by the uppermost legislative body in individually country since 1945. 

Although the KOF index is useful in ranking countries, the data it provides is not accurate enough and also not very relevant. Thus, I disagree with it. This is because some states are misrepresented. For instance, smaller nations are over-represented at the top of the listings. Also, there is the rise in the use of the internet. Thus, a consequence of utilising global mail appears low. It is also difficult to determine the number of people using the internet. Another criticism is that the KOF index system does not account for illegal immigrants in foreign countries. Moreover, the KOF index also does not consider the countries which share diplomatic offices. Therefore, the KOF index system ought to improve in these areas to provide accurate and reliable data. 

Countries with Highest Globalisation Index 

Table 1: Most Globalised Countries, KOF Swiss Economic Institute (2017) 

Countries with Lowest Globalisation Index 

Table 2: Most Globalised Countries, KOF Swiss Economic Institute (2017) 

All the countries with the highest rank represent industrialised or developed nations and have high per capita income as well as high GDP. All of they are known for stable currencies, economic cooperation, export, and foreign investment. The above countries are also members of the European Union where they interact socially, politically, and economically. 

The countries with the lowest index represent countries which are underdeveloped. They lack substantial economic and international presence prone to inflationary pressures. Oppressive regimes also govern the states. 

References 

Gygli, S., Hael, F., Sturm, J. (2018). The KOF Globalisation Index-Revisited. [Online]. Available at: https://www.ethz.ch/content/dam/ethz/special-interest/dual/kof-dam/documents/Globalization/2018/KOF_Globalisation%20Index_Revisited.pdf . Accessed 24 th Aug 2018. 

KOF Swiss Economic Institute. (2017). KOF Index of Globalisation 2017: Netherlands are the Most Globalised Country. [Online]. Available at: https://www.kof.ethz.ch/en/news-and-events/media/press-releases/2017/04/kof-globalization-index-2017.html . Accessed 24 th Aug 2018.