Investigating the effect of globalization on the economic complexity of countries

Subject Areas : Regional Planning

NaserAli Azimi ¹ , Daniel Ali Azimi ²

1 - Associate Professor of Economic Science Group, National Research Institute for Science Policy, Tehran, Iran.
2 - Daniel Ali Azimi, BSc. candidate, Faculty of Computer Science and Engineering, Shahid Behesti University, Tehran.

Received: 2020-06-10 Accepted : 2020-07-08 Published : 2022-04-21

Keywords: Globalization, Economic Complexity, Data Panel, Globalization Dimensions, KOF Globalization Index,

Abstract :

Nowadays globalization is a very important and undeniable issue that has different economic, social, and political dimensions. Globalization has occurred due to economic, political, scientific developments, and the expansion of communications In the recent decade, and countries must align themselves with it. On the other hand, the economic growth and development of countries are very much Has been affected by which relationship, and globalization affects through various ways. One of the indicators that have recently been used to measure the economic growth and development of countries is the Economic Complexity Index. That is a reflection of the country's productive capabilities and plays an important role in economic growth. This study aims to examine the effect of globalization in three economic, social, and political dimensions on the economic complexity of countries. statistics on globalization in three economic, social, and political dimensions are extracted from the website of the Swiss Economic Institute KOF. The Human Capital Accumulation Index, and Good Governance Indicators, have also been used as control variables in this study. For this purpose, 110 countries over 15 years were studied from 2002 to 2016 using the data panel method. The research findings indicate that the globalization index in all three dimensions has a positive and significant effect on the Economic Complexity Index. The coefficients in all three dimensions are measured respectively Economic dimension (0.01), Social dimension (0.07), and Political dimension (0.03). This shows that the index of globalization in the social dimension has the greatest impact. The all three dimensions of globalization could reinforce the economic complexity.
Key words: Globalization, Economic Complexity, Data Panel, Globalization Dimensions, KOF Globalization Index
 
 
 
Extended Abstract
 
Introduction
Nowadays globalization is a very important and undeniable issue that has different economic, social, and political dimensions. Globalization has occurred due to economic, political, scientific developments, and the expansion of communications In the recent decade, which countries must adapt to it. On the other hands, The globalization and opening of trade borders and the integration of national economies into the global economy will lead to an increase in international trade, the globalization of production, the flow of foreign direct investment, and the transfer of technology to countries.One of the indicators that is recently used to measure the economic growth and development of countries is the Economic Complexity Index, which is the productive capabilities of the country and plays an important role in economic growth. Economic complexity indicates the level of technology of countries, and the more complex a country is, the higher the level of development. The importance of economic complexity is not limited to the ability to apply knowledge in the production process, but also includes much broader dimensions such as the degree of dependence of an economy. Therefore, the more diverse a country's export basket is and, of course, the more complex its goods, the more powerful it will be in international economic interactions. This study seeks to examine the impact of globalization in three economic, social and political dimensions on economic complexity. In fact, the main question of this research is whether globalization has an effect on the complexity of countries, and if so, to what extent, and which dimension of globalization has the greatest impact on the economic complexity of countries?
 
Methodology
The present study is applied in terms of purpose and analytical in terms of method. Library and documentary method have been used to collect information. In order to investigate the effect of globalization on the economic complexity of countries, the index of globalization in three dimensions of economic, social and political and the index of economic complexity have been used. Economics is extracted from Harvard University. Study control variables also include indicators of good governance and human capital collected from the World Bank. For this purpose, 110 countries in a period of 15 years, from 2002 to 2016 were studied using the GLS model panel method. Stata 14 software was used to calculate the model.
 
findings
Findings indicate that the index of globalization in all three dimensions of economic, social and political, has a positive and significant effect on the index of economic complexity. Impact coefficients in all three dimensions are: economic dimension (0.01), social dimension (0.07) and political dimension (0.03). Which shows that the index of globalization in the social dimension has had the greatest impact compared to the other two dimensions. Also, the control variables of human capital accumulation, control of corruption, quality of regulations and rule of law have had a positive and significant effect on the index of economic complexity. As a result, all aspects of globalization can enhance the economic complexity of countries.
 
Conclusion
To this end, the relationship and impact of globalization in three economic, social and political dimensions on the index of economic complexity has been studied. Findings show that the coefficients of all explanatory variables of the research are positive and are statistically significant at a high level. In general, the findings indicate that globalization in all three economic, social and political dimensions leads to increased economic complexity of countries. But the index of social globalization has had a greater impact on the economic complexity of countries. Globalization in all its dimensions leads to an increase in the economic complexity of countries. Given the positive impact of globalization on the economic complexity of the country, it is suggested that the government pursue the necessary policies to remove barriers to free trade, facilitate investment conditions and improve the conditions of globalization in any dimension.

References:

1. 1.      1.ATLAS. (2018). Country Complexity Rankings (ECI). Retrieved from Atlas of Economic Complexity: http://atlas.cid.harvard.edu/rankings


2. 2.       2.Bahar, D., Hausmann, R., & Hidago, C. (2014 ). Neighbors and the evolution of the comparative. Journal of International, , 92(1), 111-123.


3. 3.       3.Basu, S. (1997). The conservatism principle and the asymmetric timeliness of earnings1. Journal of accounting and economics, 24(1), 3-37.


4. 4.       4.Caselli, M. (. (2012). Trying to measure globalization: Experiences, critical Issues and perspectives (Vol. 4(. Springer Science & Business Media.


5. 5.       5.Chang, C. P., Berdiev, A. N., & Lee, C. C. (2013). Energy exports, globalization and economic growth: The case of South Cauca-sus. Economic Modelling,(33), 333-346. doi: DOI:10.1016/j.econmod.2013.04.027


6. 6.       6.Clark, W. C. (2000). Environmental globalization. In Governance in a Globalizing World (pp. 86– 108). Brookings Institution Press.


7. 7.       7.Dadgar, Y., & Naji Meydani, A. A. (2004). The effects of globalization on trade on economic growth in Iran. Mofid Letter, 10(42), 33-64.


8. 8.       8.Dehghai, A. (2017). Investigating and Analyzing Consequences of Globalization on Dimensions of Life in Settled Nomadic Communities (Case Study: Canons of Nomadic Settlement in Fars Province. Quarterly Scientific Journal of Regional Planning, 7(27), 35-46.


9. 9.       9.Dreher, A. (2006). Does Globalization Affect Growth? Evidence from a New Index of Globalization. Applied Economics, 38(10), 1091-1110.


10. 10.   10.Dreher, A., Gaston, N., & Martens, P. (2008). Measuring Globalisation. New York: Gauging its Consequences . Springer. doi:DOI:10.1007/978-0-387-74069-0


11. 11.   11.Eltejaee, E., & Hosseini, R. (1395). The Impact of Patent on Economic Growth In developed and developing countries. Eghtead-e Tatbiqi, 3(1), 1-20.


12. 12.   12.Feghe Majidi, A., Samadipour, S., & Salami, F. (2019). The Effect of Globalization on the Economy of Developing Countries. Quarterly Journal of The Macro and Strategic Policies, 7(1), 30-45.


13. 13.   13.Feghh Majidi, A., & Ali moradi Afshar, P. (2011). Investigating the Relationship between Economic Globalization and Economic Growth in the Middle East and North Africa (MENA). Political & Economic Ettelaat(290), 92-110.


14. 14.   14.Gurgul, H., & Lach, Ł. ( 2014). Globalization and economic growth: Evidence from two decades of transition in CEE. Economic Modelling( 36), 99-107. doi:DOI:10.1016/j.econmod.2013.09.022


15. 15.   15.Gygli, S., Haelg, F., Potrafke, N., & Sturm, J.-​. (2019). The KOF Globalisation Index . Revisited, Review of International Organizations, 14(3), 543-​574 . Retrieved from https://doi.org/10.1007/s11558-​019-09344-2


16. 16.   16.Hausman, C., & Hidalgo, R. (2011). The atlas of economic complexity: Mapping path to prosperity R. Hausmann, CA Hidalgo, S. Bustos, M. Coscia, S. Chung, J. Jimenez, A. Simoes, MA Yildirim/. . Puritan Press–2011, 364 p.


17. 17.   17.Hausmann, R., Hidalgo, C. A., Bustos, S., Coscia, M., Simoes, A., & Yildirim, M. A. (2014). The atlas of economic complexity: Mapping paths to prosperity. Mit Press.


18. 18.   18.Hezarjaribi, J., & Arfaeimoghadam, A. (2015). Globalization and Social Development of Iran in the last three decades between 1982 - 2012. Journal of Iranian Social Development Studies, 7(2), 7-26.


19. 19.   19.IMF. (2002). IMF. Retrieved from https://www.imf.org/external/np/exr/ib/2002/031502.htm


20. 20.   20.Johnson, I. (1997). Redefining the concept of governance. Political and Social Policies Divison, Canadian International Development Agency.


21. 21.   21.Kacowicz, A. (2008). Latin America and the world: globalization, regionalization, and fragmentation. . Nueva Sociedad(214), 1-11.


22. 22.   22.Kaufmann, D., Kraay, A., & Zoido-Lobatón, P. (October 1999). Aggregating Governance Indicators. (World Bank Policy Research WorkingPaper2195.


23. 23.   23.Kilic, C. (2015). Effects of Globalization on Economic Growth: Panel Data Analysis for Developing Countries. Economic Insights – Trends and Challenges, 4(1), 1-11.


24. 24.   24.Komeijani, A., & Salatin, P. (2008). The effect of good governance on economic growth in the selected countries OPEC and OECD. Quartery journal of Economical Modeling, 2(2), 1-24.


25. 25.   25.Lee, K.-K., & Vu, T. ( 2019). Economic complexity, human capital and income inequality: a cross-country analysis. The Japanese Economic Review, 1-24.


26. 26.   26.Neto, D. G., & Veiga, F. J. (2008). Financial globalization, convergence and growth. NIPE Working Paper No. 7/2008. doi:http://dx.doi.org/10.2139/ssrn.1184047


27. 27.   27.Norris, P. (2000). Global governance and cosmopolitan citizens. In Governance in a globalizing world (pp. 155-177). Brookings Institution Press.


28. 28.   28.Pajooyan, J., & FaghihNasiri, M. (2010). The Impact of Competitiveness on Economic Growth By Endogenous Growth Model. Iranian Journal of Economic Research, 13(38), 97-132.


29. 29.   29.Rao, B. B., & Vadlamannati, K. C. (2011). Globalization and growth in the low income African countries with the extreme bounds analysis. Economic Modelling, 28(3), 795-805. doi:10.1016/j.econmod.2010.10.009


30. 30.   30.Rao, B. B., Tamazian, A., & Vadlamannati, K. C. (2011). Growth effects of a comprehensive measure of globalization with country-specific time series data. Applied Economics, 43(5), 551-568.


31. 31.   31.Razavi, S. A., & Salimi far, M. (2013). The Effect of Economic Globalization on Economic Growth, Using Vector Auto Regression Model. Journal of Strategic Studies of Public Policy, 4(12), 9-32.


32. 32.   32.Reich, R. B. (1992). The work of nations: Preparing ourselves for 21st century Capitalis. . București: The Vintage Publication.


33. 33.   33.Scholte, J. A. (2008). Defining Globalisation. The World Economy, 31(11), 1471-1502.


34. 34.   34.Stiglitz, J. (1999). Trade and the developing world: A new agenda. Current History, . 98(631), 387-393.


35. 35.   35.Tavakoliniya, J., Majidi Khameneh, B., & Zargami, S. (2016). Assessing the Function of Metropolises in Economic Globalization (Comparative Study of Tehran and Istanbul). Quarterly Scientific Journal of Regional Planning, 6(23), 89-98.


36. 36.   36.Unite Nation Development Programs, (. (2002). Globalization and development, Twenty-ninth Session. Brazil. Retrieved from .www.undp.org


37. 37.   37.WorldBank. (1992). Governance and Development. Retrieved from http://www.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999


38. 38.   38.Zhu, S., & Li, R. (2016). Economic complexity, human capital and economic growth: empirical research based on cross-country panel data.