economic globalization and its effect on income...

ECONOMIC GLOBALIZATION AND ITS EFFECT ON INCOME INEQUALITY

Florian Springholz

Supervisor: Jakob Kapeller

MAIN RESEARCH QUESTIONS

How can economic globaliza/on (i.e. openness) be measured? ¢

What are exis/ng measures of openness?£

Which aspects of openness do they capture?£

What is effect of economic globaliza/on on income inequality?¢

MOTIVATION

Mixed results of the effects of economic globaliza7on due to Ø

measurement problems

Current research focus in the economic literature is typically on the Ø

effect of openness on economic growth

One of the main difficul1es in obtaining conclusive empirical evidence on the consequences of globaliza1on is the shortage of

convincing measures. (Arribas, 2007, p.7)

OUTLINE

Part 1: Analysis of exis2ng openness indicators¢

Literature review£

Classifica0on of indices£

Trends of trade and financial globaliza0on£

Panel dataset: correla0on analysis & interpreta0on£

Part 2:“Impact of openness on inequality”¢

Why income inequality maBers£

Recent empirical results£

New results£

WHY INEQUALITY MATTERS

Physical and mental health

Trust and social cohesion

Equality of opportunities

Social dimension

Countries with lower levels of inequality score be8er on several important social dimensions

Themajordeterminantofanindividual‘ssuccessistheincomeandeducationoftheparents.(Stiglitz,2012)

e.g. Atkinson (2015), Roemer et al. (2017), World Bank report (2016)

e.g. Wilkinson and PickeF (2010), Rowlingson (2011)

EQUALITY OF OPPORTUNITIES

“Great Gatsby Curve”: Less Income Inequality is associated with better Social Mobility across the Generations

Source: Corak (2013)

Economic Growth

Financial Stability

Economic dimensionAmbivalent relationshipØ A market-oriented economy needs

some degree of inequality

Ø Higher inequality reduces the growth rate in the long-run

Rising Inequality Ø is associated with rising debt-leverageHigh debtØ -leverage increases the risk of loan defaults and financial bubbles

e.g. Cingano, (2014); Dabla-Norris et al. (2015); OECD (2014); Ostry et al. (2014); Zweimüller et al. (2014)

e.g. Barba & Pivetti (2009), Kirschenmann et al. (2015); Kumhof et al. (2015); Malinen (2016)

Rising inequality nega.vely affects social outcomes, financial stability ¢

and economic development

What is the role of economic globaliza3on? ¢

Does more “openness” cause more inequality?¢

WHY INCOME INEQUALITY MATTERS

The ques(on is not about whether we should allow income inequality or not, it’s about the level of inequality we should approach to foster economic

stability and to ensure equality of opportuni(es

De-facto measures

¢ Trade Openness£ Exports – Imports (% GDP)

£ Trade (% GDP)

¢ Financial Openness £ Total foreign assets

and liabilities % GDP

£ Foreign Direct Investment % GDP

De-jure measures

Trade¢ Openness£ Tariff rates

Non£ -tariff trade barriers

Financial¢ Openness Capital Account RestricFons£

FDI RestricFons£

MEASURES OF ECONOMIC GLOBALIZATION

DIMENSIONS OF ECONOMIC GLOBALIZATION

De-facto measuresOutcome¢ -based Measuring the actual degree of ¢

a country’s economic integra9on

De-jure measuresPolicy¢ -basedMeasuring a country's’ ¢

willingness to be open

Hybrid measures Combination of

de-facto and de-jure measures

RECENT EMPIRICAL RESULTS

¢ Jaumotte et al. (2013): “Rising Income Inequality: Technology, or Trade and Financial Globalization?”. IMF Economic Review

Main findings: impact on inequality¢

Trade openness Ø

Financial openness Ø

Technological advancement Ø

ReplicaCon and ModificaCon: ¢

Do results depend on the measurement?Ø

ESTIMATION MODEL

Panel regression with country fixed effects and 6me dummies¢

Specifica(on¢ :

Robustness check by subs6tu6ng ¢

applied openness indicatorsØ

technology proxyØ

KOF ECONOMIC GLOBALIZATION INDEX

Weight Source50%

Trade to GDP ratio 21% World Bank (2016)

FDI total stocks 28% UNCTAD (2016)

Portfolio Investment stock 24% IMF (2016)

Income Payments to Foreign Nationals (% GDP) 27% World Bank (2016)

50%

Hidden Import Barriers 22% Gwartney et al. (2016)

Mean Tariff Rate 28% Gwartney et al. (2016)

Taxes on International Trade (% of current revenue) 26% World Bank (2016)

Capital Account Restrictions 24% Gwartney et al. (2016)

(2) De-jure economic globalization

(1) De-facto economic globalizationKOF Economic Globalization Index

Robustness check of Jaumotte et al. (2013) results (Dependent Variable: Natural Logarithm of Gini coefficient)

(1) (2) (3) (4) (5) (6)

Model specification

Original results

Replication results

Substitution of globalization

indicators


indicators

Substitution of technology

proxy

Substitution of technology proxy and

globalization indicators


proxy and globalization

indicators

Economic Globalization

KOF hybrid 0.017 0.002 KOF de-facto 0.048* 0.024 KOF de-jure -0.041 -0.026 Trade Openness Trade ratio (de-facto) -0.058* -0.052* 0.002

Tariff rates (de-jure) -0.002* -0.003** -0.002

Financial Openness Total foreign assets and liabilities (de-facto) 0.035* 0.034** -0.002

Financial Restrictions (de-jure) 0.000 -0.002 0.000

Technology Share of ICT capital in total capital stock 0.075*** 0.072*** 0.044** 0.039*

Economic Complexity Index (ECI Index) 0.005 0.008 0.001

With ICT share as technology proxy With ECI Index as technology proxy

Control variables

Credit to private sector 0.063*** 0.067*** 0.068*** 0.066*** 0.053*** 0.068*** 0.067***

Pop. Share with secondary education 0.004 0.004** 0.003* 0.004** 0.005*** 0.007*** 0.007***

Average years of schooling -0.298 -0.245 -0.264 -0.252 -0.350** -0.431*** -0.457***

Agriculture employment 0.017 0.013 -0.015 -0.018 0.028 0.038 0.041

Industry employment -0.100** -0.112*** -0.181*** -0.159*** -0.114** -0.160*** -0.135***

R-squared N.A. 0.344 0.295 0.316 0.287 0.423 0.426

Observations N.A. 297 299 299 341 370 370

Number of countries N.A. 56 57 57 64 68 68

Country FE YES YES YES YES YES YES YES

Year FE YES YES YES YES YES YES YES

Notes: The regressions were estimated using panel regressions with country fixed effects and time dummies. *denotes significance at the 10 percent level, **denotes significance at the 5 percent level, ***denotes significance at the 1 percent level. All explanatory variables are in natural logarithm,

except the tariff measure, the capital account openness index, economic complexity index and the population share with at least a secondary education. ICT= information and communications technology.

ICT share as technology proxy Complexity Index as technology proxy

Robustness check of Jaumotte et al. (2013) results (Dependent Variable: Natural Logarithm of Gini coefficient)

(1) (2) (3) (4) (5) (6)

Model specification

Original results

Replication results


indicators


indicators


proxy

Substitution of technology proxy and

globalization indicators


proxy and globalization

indicators


KOF hybrid 0.017 0.002 KOF de-facto 0.048* 0.024 KOF de-jure -0.041 -0.026 Trade Openness

Trade volume (de-facto) -0.058* -0.052* 0.002

Tariff rates (de-jure) -0.002* -0.003** -0.002

Financial Openness

Total foreign assets and liabilities (de-facto) 0.035* 0.034** -0.002

Financial Restrictions (de-jure) 0.000 -0.002 0.000

Technology

Share of ICT investment in total capital stock 0.075*** 0.072*** 0.044** 0.039*

Economic Complexity Index (ECI Index) 0.005 0.008 0.001

Control variables

Credit to private sector 0.063*** 0.067*** 0.068*** 0.066*** 0.053*** 0.068*** 0.067***

Pop. Share with secondary education 0.004 0.004** 0.003* 0.004** 0.005*** 0.007*** 0.007***

Average years of schooling -0.298 -0.245 -0.264 -0.252 -0.350** -0.431*** -

0.457*** Agriculture employment 0.017 0.013 -0.015 -0.018 0.028 0.038 0.041

Industry employment -0.100** -0.112*** -0.181*** -0.159*** -0.114** -0.160*** -

0.135*** R-squared N.A. 0.344 0.295 0.316 0.287 0.423 0.426

Observations N.A. 297 297 297 297 297 297

Number of countries N.A. 56 56 56 56 56 56

Country FE YES YES YES YES YES YES YES

Year FE YES YES YES YES YES YES YES

Notes: The regressions were estimated using panel regressions with country fixed effects and time dummies. *denotes significance at the 10 percent level, **denotes significance at the 5 percent level, ***denotes significance at the 1 percent level. All explanatory variables are in natural logarithm,

except the tariff measure, the capital account openness index, economic complexity index and the population share with at least a secondary education. ICT= information and communications technology.

PRELIMINARY CONCLUSION

¢ Results not robust to changes of indicators

¢ Concerns about dataØ Low number of observations (~290)

Ø Relative short time period covered (1990-2003)

Ø “Weak” data: inter and extrapolation of nearly all variables

Panel regression with country fixed effects and 6me dummies¢

Specifica(on¢ :

Three models based on different specifica(ons¢

ln #$%$&' = )* + ), -./0/12. 34/56427682/0 96:2654-; &'+)< 8-.ℎ0/4/32.64 .ℎ603- >:/?@ &' +)A ./08:/4 96:2654-; + B& + C' + D&'

OWN ESTIMATION MODEL

Observations Countries Time

BIG sample 2.568 ~ 108 1972 – 2015

MID sample 905 ~ 89 1992 – 2015

OECD sample 417 33 1992 – 2015

Jaumotte sample 297 54 1990 – 2003

DATA – MAIN VARIABLESProxy Dependent Variable Source

Income Inequality GINI coefficient Milanovic (2016)

Proxy Independent Variables Source

Economic GlobalizationKOF Economic Globalization

Index (de-facto / de-jure)Dreher et. al. (2017)

Trade Openness

Trade ratio

Export ratio

Import ratio

Trade Restrictions (FTI Index)

World Bank (2016)

Gwartney et al. (2017)

Financial Openness

Total foreign assets & liabilities

Foreign Direct Investment

Portfolio equity

Capital Account Restrictions

(KAOPEN Index)

Lane & Milesi-Ferretti

(2017)

OECD (2017)

Chinn & Ito (2017)

DATA – CONTROL VARIABLESProxy Independent Variables Source

Technological change Economic Complexity Index Hidalgo et al. (2017)

Financial development Credit to private sector IMF (2017)

Education

Primary enrolment ratio

UNESCO (2017)Secondary enrolment ratio

Tertiary enrolment ratio

Economic development(“trickle-down effect”)

Industry employment share ILOSTAT (2017)

World Bank (2017)

Agriculture employment share

GDP growth

Social Security Social expenditures ratio OECD (2018)

Employment Protection Legislation

Individual and collective dismissals OECD (2018)

Temporary contracts

BIG SAMPLE MID SAMPLE SMALL SAMPLE Observations 2,586 1,061 417 Number of countries 108 89 33

Model specification (1) (2) (3) (4) (5) (6)


KOF hybrid 0.098*** 0.153*** 0.304*** KOF de-facto 0.089*** 0.083*** 0.257*** KOF de-jure 0.011 0.064*** 0.060**

Technology

Economic Complexity -0.004 -0.003 -0.018 -0.014 -0.003 -0.011

Controls

Credit to private sector 0.011** 0.014** -0.030*** -0.033*** -0.012 -0.020 Primary enrolment -0.063*** -0.059*** -0.128*** -0.141*** -0.029 -0.009 Secondary enrolment 0.007 0.013 -0.006 -0.013 Tertiary enrolment 0.023 0.022 0.008 0.005 Industrial employment -0.162*** -0.165*** -0.207*** -0.206*** Agricultural employment -0.032** -0.033** 0.034 0.047 GDP growth -0.001* -0.002** 0.001 0.001

Employment Protection Legislation (EPL)

Individual and collective dismissals

-0.079*** -0.048

Temporary employment -0.037*** -0.035***

Social protection

Social expenditures -0.083** -0.071*

Constant 3.607*** 3.574*** 4.208*** 4.297*** 3.519*** 3.273*** Adjusted R2 0.046 0.054 0.111 0.114 0.250 0.276 Observations 2,586 2,586 1,061 1,061 417 417 Number of countries 108 108 89 89 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES

Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

Only OECD countries

FINDINGS

Main findings: impact on inequality¢

Economic Globalization Ø (coeffs. highly significant)

Technological Ø advancement (coeffs. not significant!)

Social expenditures Ø (coeffs. significant)

Employment Protection Legislation Ø (coeffs. significant)

Results¢ of educa&on, financial and economic development depend on

underlying sample

BIG SAMPLE MID SAMPLE SMALL SAMPLE Observations 2,586 1,061 417 Number of countries 108 89 33

Model specification (1) (2) (3) (4) (5) (6) Trade dimension Total Trade 0.064*** 0.055** 0.182*** Exports 0.068*** 0.048* -0.064 Imports 0.010 -0.006 0.239*** Trade Restrictions (FTI Index)

0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033

Financial dimension

Total assets and liabilities. -0.005 -0.019 -0.054** Portfolio equity 0.006* 0.008 0.015 FDI inward 0.016*** 0.011 0.029* FDI outward -0.003 -0.004 -0.012 Financial Restrictions (KAOPEN Index)

0.000** 0.000 0.000 -0.000 0.001 0.001*

Technology Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 Other controls Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 Secondary enrolment -0.014 -0.022 -0.030 0.033 Tertiary enrolment 0.029* 0.023 0.021 0.008 Industrial employment -0.191*** -0.179*** -0.285*** -0.188*** Agricultural employment -0.027* -0.026* 0.028 0.039 GDP growth 0.001 0.000 0.001 -0.001 Employment Protection Legislation (EPL)


-0.057* -0.062*

Temporary contracts -0.035*** -0.031*** Social protection Social expenditures -0.139*** -0.120*** Constant 3.235*** 3.339*** 3.757*** 3.617*** 3.287*** 3.520***

R-squared 0.087 0.109 0.116 0.141 0.289 0.293 Observations 2,347 1,571 960 899 419 417 Number of countries 102 98 81 76 33 33

Only OECD countries

CONCLUSIONS

¢ Overall tendency that economic globalization increases the Gini coefficient

¢ KOF indicators produce the most robust results and highly significant positive coefficients across all different samples

¢ When using more disaggregated measures, the results depend more on specification and underlying sample

¢ Robustness checks e.g. with Gini disposable (net) instead of Gini market (gross) lead to same conclusions

BACKUP &

EXTENSIONS

MODEL #1: Economic Globalization Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable

Standard errors in parentheses. Data description and sources are available in the appendix.

Levels of significance: *** p<0.01, ** p<0.05, * p<0.1

VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9) KOF Economic Globalization Index

0.108*** 0.099*** 0.082*** 0.098*** 0.126*** 0.110*** 0.124*** 0.131*** 0.153*** (0.011) (0.013) (0.013) (0.014) (0.016) (0.018) (0.025) (0.025) (0.029)

Economic Complexity 0.007 0.009 -0.004 -0.023*** -0.024** -0.006 -0.011 -0.018 (0.007) (0.007) (0.008) (0.009) (0.010) (0.015) (0.015) (0.017)

Credit to private sector 0.010** 0.011** 0.018*** 0.012* -0.017* -0.021** -0.030*** (0.004) (0.004) (0.006) (0.007) (0.009) (0.009) (0.010)

Primary enrolment -0.063*** -0.054** -0.080*** -0.139*** -0.138*** -0.128*** (0.020) (0.024) (0.028) (0.036) (0.036) (0.042)

Secondary enrolment -0.056*** -0.047*** -0.015 0.006 0.007 (0.014) (0.017) (0.023) (0.024) (0.026)

Tertiary enrolment -0.008 0.024* 0.020 0.023 (0.010) (0.013) (0.013) (0.015)

Industrial employment -0.132*** -0.153*** -0.162*** (0.028) (0.029) (0.032)

Agricultural employment -0.040*** -0.032** (0.014) (0.014)

GDP growth -0.001* (0.001)

Constant 3.327*** 3.341*** 3.415*** 3.607*** 3.621*** 3.758*** 4.235*** 4.327*** 4.208*** (0.043) (0.047) (0.047) (0.101) (0.108) (0.131) (0.172) (0.174) (0.206)

R-squared 0.044 0.039 0.042 0.046 0.073 0.071 0.099 0.106 0.111

Observations 4,340 3,502 2,906 2,586 2,216 1,845 1,217 1,217 1,061 Number of countries 147 110 110 108 107 107 106 106 89

MODEL #2: De-jure and de-facto Economic Globalization Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable

Standard errors in parentheses. Data description and sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1

VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9) Economic Globalization de-facto

0.079*** 0.074*** 0.086*** 0.089*** 0.111*** 0.103*** 0.055*** 0.063*** 0.083*** (0.008) (0.010) (0.011) (0.012) (0.012) (0.014) (0.019) (0.019) (0.022)

Economic Globalization de-jure

0.016** 0.014* 0.006 0.011 0.018* 0.010 0.062*** 0.062*** 0.064*** (0.008) (0.008) (0.008) (0.009) (0.009) (0.012) (0.018) (0.018) (0.021)

Economic Complexity 0.005 0.008 -0.003 -0.022** -0.021** -0.005 -0.009 -0.014 (0.008) (0.007) (0.008) (0.009) (0.010) (0.015) (0.015) (0.018)

Credit to private sector 0.011** 0.014** 0.013** 0.008 -0.016* -0.021** -0.033*** (0.005) (0.006) (0.006) (0.007) (0.009) (0.009) (0.010)

Primary enrolment -0.059*** -0.060** -0.089*** -0.143*** -0.144*** -0.141*** (0.020) (0.024) (0.028) (0.037) (0.037) (0.042)

Secondary enrolment -0.043*** -0.030* -0.016 0.007 0.013 (0.014) (0.017) (0.024) (0.025) (0.027)

Tertiary enrolment -0.013 0.024* 0.020 0.022 (0.010) (0.013) (0.013) (0.015)


Agricultural employment -0.040*** -0.033** (0.014) (0.014)

GDP growth -0.002** (0.001)

Constant 3.381*** 3.385*** 3.375*** 3.574*** 3.610*** 3.749*** 4.292*** 4.386*** 4.297*** (0.041) (0.046) (0.050) (0.101) (0.107) (0.129) (0.172) (0.174) (0.206)

R-squared 0.047 0.039 0.051 0.054 0.083 0.082 0.100 0.107 0.114

Observations 4,254 3,439 2,846 2,556 2,195 1,824 1,196 1,196 1,040 Number of countries 143 108 108 106 105 105 104 104 87

MODEL #3: Trade and financial dimension separated Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as Dependent Variable:

Standard errors in parentheses. Data sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1

VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9)

Trade-to-GDP 0.047*** 0.045*** 0.053*** 0.064*** 0.058*** 0.066*** 0.043** 0.054*** 0.055** (0.009) (0.010) (0.010) (0.011) (0.011) (0.013) (0.020) (0.020) (0.023)

Trade Restrictions 0.021*** 0.025*** 0.024*** 0.028*** 0.043*** 0.042*** 0.061** 0.062** 0.063** (0.006) (0.006) (0.006) (0.007) (0.007) (0.008) (0.026) (0.026) (0.029)

Financial assets and liabilities

0.007 0.002 0.003 -0.005 -0.000 -0.009 -0.006 -0.011 -0.019 (0.004) (0.005) (0.006) (0.006) (0.007) (0.008) (0.012) (0.012) (0.014)

Financial Restrictions 0.000** 0.000** 0.000** 0.000** 0.000* 0.000 0.000 0.000 0.000

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Economic Complexity -0.003 -0.009 -0.019** -0.021** -0.021** 0.011 0.008 0.003 (0.007) (0.007) (0.008) (0.009) (0.010) (0.016) (0.016) (0.019)

Credit to private sector 0.028*** 0.031*** 0.031*** 0.030*** 0.002 -0.001 0.006 (0.006) (0.006) (0.007) (0.008) (0.010) (0.010) (0.012)

Primary enrolment 0.011 0.045* 0.032 0.005 0.007 0.017 (0.022) (0.027) (0.033) (0.049) (0.049) (0.054)

Secondary enrolment -0.053*** -0.056*** -0.037 -0.024 -0.014 (0.014) (0.018) (0.025) (0.025) (0.028)

Tertiary enrolment -0.001 0.032** 0.030** 0.029* (0.010) (0.014) (0.014) (0.015)


Agricultural employment -0.030** -0.027* (0.013) (0.014)

GDP growth 0.001 (0.001)

Constant 3.459*** 3.453*** 3.339*** 3.235*** 3.214*** 3.247*** 3.686*** 3.758*** 3.757*** (0.042) (0.042) (0.046) (0.113) (0.123) (0.154) (0.250) (0.251) (0.276)

R-squared 0.056 0.067 0.078 0.087 0.112 0.119 0.101 0.105 0.116

Observations 3,632 3,081 2,618 2,347 2,032 1,677 1,087 1,087 960 Number of countries 135 106 105 102 98 96 96 96 81

MODEL #4: Trade and financial dimension separated and further disaggregated Panel Regression with country fixed-effects and time dummies with natural logarithm of Gini coefficient as dependent variable:

Standard errors in parentheses. Data description and sources are available in the appendix. Levels of significance: *** p<0.01, ** p<0.05, * p<0.1

VARIABLES (1) (2) (3) (4) (5) (6) (7) (8) (9)

Exports 0.027* 0.017 0.038** 0.045*** 0.033* 0.030 0.013 0.025 0.029 (0.014) (0.015) (0.015) (0.016) (0.018) (0.020) (0.022) (0.023) (0.024)

Imports 0.053*** 0.057*** 0.046*** 0.058*** 0.078*** 0.095*** 0.032 0.028 0.020 (0.015) (0.016) (0.016) (0.017) (0.018) (0.021) (0.026) (0.026) (0.028)

Trade Restrictions 0.028** 0.029** 0.030** 0.040*** 0.050*** 0.070*** 0.100*** 0.102*** 0.107*** (0.012) (0.012) (0.013) (0.015) (0.016) (0.017) (0.031) (0.031) (0.033)

Portfolio Equity -0.000 -0.004 -0.001 -0.000 -0.003 -0.009** 0.009* 0.008* 0.006 (0.002) (0.003) (0.003) (0.003) (0.003) (0.004) (0.005) (0.005) (0.005)

FDI inward 0.011** 0.016*** 0.028*** 0.029*** 0.035*** 0.031*** 0.014* 0.015* 0.018** (0.005) (0.005) (0.006) (0.006) (0.007) (0.007) (0.008) (0.008) (0.009)

FDI outward -0.002 -0.000 -0.007** -0.008** -0.013*** -0.019*** -0.002 -0.002 -0.003 (0.003) (0.003) (0.003) (0.003) (0.003) (0.004) (0.004) (0.004) (0.005)

Financial Restrictions 0.000** 0.000* 0.000* 0.000*** 0.000*** 0.000** 0.000 -0.000 -0.000

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Economic Complexity 0.008 0.007 -0.023* -0.028** -0.025* -0.013 -0.016 -0.017 (0.010) (0.010) (0.012) (0.012) (0.014) (0.017) (0.017) (0.019)

Credit to private sector 0.020*** 0.020*** 0.029*** 0.029*** -0.013 -0.016 -0.012 (0.007) (0.008) (0.008) (0.009) (0.010) (0.010) (0.012)

Primary enrolment 0.023 -0.006 -0.028 0.009 0.011 0.013 (0.034) (0.040) (0.046) (0.053) (0.053) (0.057)

Secondary enrolment -0.008 -0.020 0.008 0.022 0.029 (0.019) (0.024) (0.029) (0.030) (0.032)

Tertiary enrolment 0.005 0.023 0.021 0.023 (0.012) (0.015) (0.015) (0.016)


Agricultural employment -0.028** -0.027** (0.013) (0.014)

GDP growth 0.001 (0.001)

Constant 3.352*** 3.344*** 3.189*** 3.001*** 3.073*** 3.065*** 3.515*** 3.549*** 3.510*** (0.063) (0.063) (0.074) (0.175) (0.196) (0.223) (0.266) (0.266) (0.282)

R-squared 0.072 0.078 0.092 0.118 0.150 0.168 0.128 0.132 0.135 Observations 2,528 2,322 1,893 1,683 1,489 1,268 997 997 905 Number of countries 123 102 102 99 94 90 90 90 77

BIG SAMPLE MID SAMPLE SMALL SAMPLE

Observations 2,586 1,061 417 Number of countries 108 89 33



KOF hybrid 0.026 0.103*** 0.139**

KOF de-facto 0.048*** 0.092*** 0.098**

KOF de-jure -0.006 0.015 0.032

Technology

Economic Complexity 0.010 0.010 0.008 0.009 0.012 0.010

Controls

Credit to private sector 0.014*** 0.021*** 0.001 -0.005 -0.007 -0.007

Primary enrolment -0.035 -0.030 -0.061 -0.064 -0.147 -0.150

Secondary enrolment 0.001 0.017 -0.047 -0.044

Tertiary enrolment 0.016 0.013 -0.020 -0.021

Industrial employment -0.089*** -0.088*** -0.146*** -0.147***

Agricultural employment -0.026** -0.030*** -0.022 -0.018

GDP growth 0.001 0.000 0.001 0.001



-0.013 -0.006

Temporary employment -0.011 -0.011

Social protection

Social expenditures -0.044 -0.046

Constant -0.995*** -1.100*** -0.905*** -0.918*** -0.119 -0.074 Observations 2,559 2,529 1,192 1,171 476 476 Number of countries 110 108 88 86 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES


Gini disposable from SWIID database

Benchmark model 1

KOF Economic Globalization

Full table with Std. Errors




Trade dimension

Total Trade -0.026** 0.006 0.086**

Exports 0.033** 0.043** 0.083**

Imports -0.030* -0.006 -0.014


0.028*** -0.024 0.034 0.033 -0.066 -0.110

Financial dimension

Total assets and liabilities. 0.038*** 0.034*** -0.039*

Portfolio equity 0.003 -0.001 0.008

FDI inward 0.022*** 0.017** 0.005

FDI outward -0.006** -0.019*** -0.010

Financial Restrictions (KAOPEN Index)

0.000 0.000 -0.000 0.000 0.000 0.000

Technology

Economic Complexity 0.013 0.024** 0.018 0.031* 0.020 0.018

Other controls

Credit to private sector 0.021*** 0.021*** 0.004 0.016 0.027 0.015

Primary enrolment 0.052* 0.024 0.023 0.027 0.017 -0.033

Secondary enrolment 0.022 -0.011 -0.071* -0.059

Tertiary enrolment 0.023* 0.016 -0.031 -0.034

Industrial employment -0.082*** -0.083*** -0.155*** -0.096**

Agricultural employment -0.021* -0.035*** -0.004 -0.014

GDP growth 0.002** 0.001 0.000 0.001



-0.009 -0.002

Temporary contracts -0.008 -0.006

Social protection

Social expenditures -0.055* -0.025

Constant -1.474*** -1.197*** -1.371*** -1.233*** -0.179 -0.078

Observations 2,367 1,763 1,110 1,051 468 466 Number of countries 106 102 82 79 33 33 Country FE YES YES YES YES YES YES

Gini disposable

Benchmark model 2

Trade and Financial dimension disaggregated


Benchmark model 1

KOF Economic Globalization






KOF hybrid 0.098*** 0.153*** 0.304*** (0.014) (0.029) (0.063)

KOF de-facto 0.089*** 0.083*** 0.257*** (0.012) (0.022) (0.048)

KOF de-jure 0.011 0.064*** 0.060** (0.009) (0.021) (0.052)

Technology

Economic Complexity -0.004 -0.003 -0.018 -0.014 -0.003 -0.011 (0.008) (0.008) (0.017) (0.018) (0.032) (0.031)

Controls

Credit to private sector 0.011** 0.014** -0.030*** -0.033*** -0.012 -0.020 (0.004) (0.006) (0.010) (0.010) (0.023) (0.022)

Primary enrolment -0.063*** -0.059*** -0.128*** -0.141*** -0.029 -0.009 (0.020) (0.020) (0.042) (0.042) (0.137) (0.135)

Secondary enrolment 0.007 0.013 -0.006 -0.013 (0.026) (0.027) (0.051) (0.051)

Tertiary enrolment 0.023 0.022 0.008 0.005 (0.015) (0.015) (0.027) (0.026)

Industrial employment -0.162*** -0.165*** -0.207*** -0.206*** (0.032) (0.032) (0.055) (0.054)

Agricultural employment -0.032** -0.033** 0.034 0.047 (0.014) (0.014) (0.039) (0.039)

GDP growth -0.001* -0.002** 0.001 0.001 (0.001) (0.001) (0.001) (0.001)



-0.079*** -0.048 (0.031) (0.032)

Temporary employment -0.037*** -0.035*** (0.010) (0.010)

Social protection

Social expenditures -0.083** -0.071* (0.038) (0.037)

Constant 3.607*** 3.574*** 4.208*** 4.297*** 3.519*** 3.273*** (0.101) (0.101) (0.206) (0.206) (0.703) (0.692)

R-squared 0.046 0.054 0.111 0.114 0.250 0.276 Observations 2,586 2,586 1,061 1,061 417 417 Number of countries 108 108 89 89 33 33 Country FE YES YES YES YES YES YES Year FE YES YES YES YES YES YES





Trade dimension

Total Trade 0.064*** 0.055** 0.182*** (0.011) (0.023) (0.042)

Exports 0.068*** 0.048* -0.064 (0.017) (0.025) (0.048)

Imports 0.010 -0.006 0.239*** (0.018) (0.028) (0.054)


0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033 (0.007) (0.016) (0.029) (0.033) (0.086) (0.093)

Financial dimension

Total assets and liabilities. -0.005 -0.019 -0.054** (0.006) (0.014) (0.023)

Portfolio equity 0.006* 0.008 0.015 (0.003) (0.005) (0.012)

FDI inward 0.016*** 0.011 0.029* (0.005) (0.008) (0.016)

FDI outward -0.003 -0.004 -0.012 (0.003) (0.006) (0.010)


0.000** 0.000 0.000 -0.000 0.001 0.001* (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Technology

Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 (0.008) (0.012) (0.019) (0.021) (0.032) (0.033)

Other controls

Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 (0.006) (0.008) (0.012) (0.012) (0.025) (0.025)

Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 (0.022) (0.036) (0.054) (0.058) (0.141) (0.137)

Secondary enrolment -0.014 -0.022 -0.030 0.033 (0.028) (0.034) (0.053) (0.052)

Tertiary enrolment 0.029* 0.023 0.021 0.008 (0.015) (0.016) (0.029) (0.028)


Agricultural employment -0.027* -0.026* 0.028 0.039 (0.014) (0.014) (0.040) (0.041)

GDP growth 0.001 0.000 0.001 -0.001 (0.001) (0.001) (0.002) (0.002)

Benchmark model 2





-0.057* -0.062* (0.033) (0.033)

Temporary contracts -0.035*** -0.031*** (0.011) (0.010)

Social protection

Social expenditures -0.139*** -0.120*** (0.039) (0.039)

Constant 3.235*** 3.339*** 3.757*** 3.617*** 3.287*** 3.520*** (0.113) (0.185) (0.276) (0.289) (0.758) (0.721)

R-squared 0.087 0.109 0.116 0.141 0.289 0.293 Observations 2,347 1,571 960 899 419 417 Number of countries 102 98 81 76 33 33 Country FE YES YES YES YES Year FE YES YES YES YES





Trade dimension

Total Trade 0.064*** 0.055** 0.182*** (0.011) (0.023) (0.042)

Exports 0.068*** 0.048* -0.064 (0.017) (0.025) (0.048)

Imports 0.010 -0.006 0.239*** (0.018) (0.028) (0.054)


0.028*** 0.048*** 0.063** 0.148*** 0.118 -0.033 (0.007) (0.016) (0.029) (0.033) (0.086) (0.093)

Financial dimension

Total assets and liabilities. -0.005 -0.019 -0.054** (0.006) (0.014) (0.023)

Portfolio equity 0.006* 0.008 0.015 (0.003) (0.005) (0.012)

FDI inward 0.016*** 0.011 0.029* (0.005) (0.008) (0.016)

FDI outward -0.003 -0.004 -0.012 (0.003) (0.006) (0.010)


0.000** 0.000 0.000 -0.000 0.001 0.001* (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Technology

Economic Complexity -0.019** -0.019 0.003 -0.024 0.018 -0.001 (0.008) (0.012) (0.019) (0.021) (0.032) (0.033)

Other controls

Credit to private sector 0.031*** 0.018** 0.006 -0.015 0.033 0.034 (0.006) (0.008) (0.012) (0.012) (0.025) (0.025)

Primary enrolment 0.011 -0.043 0.017 -0.014 0.121 0.044 (0.022) (0.036) (0.054) (0.058) (0.141) (0.137)

Secondary enrolment -0.014 -0.022 -0.030 0.033 (0.028) (0.034) (0.053) (0.052)

Tertiary enrolment 0.029* 0.023 0.021 0.008 (0.015) (0.016) (0.029) (0.028)


Agricultural employment -0.027* -0.026* 0.028 0.039 (0.014) (0.014) (0.040) (0.041)

GDP growth 0.001 0.000 0.001 -0.001 (0.001) (0.001) (0.002) (0.002)

Benchmark model 2 cont.



ECONOMIC COMPLEXITY INDEX(ECI)

¢ Proposed in 2009 byØ Cesar Hidalgo (Massachusetts Institute of Technology) Ø Ricardo Hausmann (Harvard University)

¢ Holistic measure of a country’s production characteristics

¢ To achieve this goal, the ECI combines metrics of the diversity of countries and the ubiquity of products to create measures of the relative complexity of a country's exports

Source: https://atlas.media.mit.edu/en/rankings/country/eci/

ECONOMIC COMPLEXITY RANKING(2016)

Rank Country ECI Index

64 Algeria -0,78

65 Senegal -0,81

66 Cambodia -0,82

67 Georgia -0,84

68 Sri Lanka -0,85

69 Chile -0,86

70 Botswana -0,99

71 Albania -1,00

72 Paraguay -1,04

73 Mali -1,06

74 Pakistan -1,07

75 Morocco -1,09

76 Peru -1,11

77 Zimbabwe -1,14

78 Ghana -1,19

79 Laos -1,21

80 Tanzania -1,21

81 Ethiopia -1,33

82 Ecuador -1,38

83 Madagascar -1,56

84 Mongolia -1,76


1 Switzerland 2,60

2 Japan 2,47

3 Singapore 2,13

4 South Korea 1,98

5 Germany 1,90

6 Sweden 1,59

7 United States 1,55

8 United Kingdom 1,55

9 Czech Republic 1,40

10 Israel 1,37

11 Ireland 1,31

12 Hong Kong 1,23

13 France 1,16

14 Malaysia 1,03

15 Hungary 1,03

16 Belgium 1,00

17 Italy 0,95

18 China 0,89

19 Slovakia 0,87

20 Norway 0,82

21 Denmark 0,81


: : :

: : :

34 Serbia 0,07

35 Portugal 0,07

36 India 0,05

37 Philippines 0,05

38Bosnia and

Herzegovina0,03

39 Jordan -0,01

40 Turkey -0,04

41 South Africa -0,04

42 Tunisia -0,09

43 Brazil -0,10

44 Colombia -0,12

45New

Zealand-0,13

46 Costa Rica -0,18

47 Greece -0,20

48 El Salvador -0,26

49 Uruguay -0,35

: : :

: : :

Weight Source Definition

50%

Trade to GDP ratio 21% World Bank (2016) Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product. Data are in percent of GDP.

FDI total stocks 28% UNCTAD (2016) Sum of inward and outward FDI stock as a percentage of GDP.

Portfolio Investment stock 24% IMF (2016) Portfolio investment is the sum of portfolio investment assets stocks and portfolio investment liabilities stocks. Data are in percent of GDP.

Income Payments to Foreign Nationals (percent of GDP)

27% World Bank (2016)

Income payments refer to employee compensation paid to nonresident workers and investment income (payments on direct investment, portfolio investment, other investments). Income derived from the use of intangible assets is excluded. Data are in percent of GDP.

50%

Hidden Import Barriers 22% Gwartney et al. (2016)

The index is based on the Global Competitiveness Report’s survey question: “In your country, tariff and non-tariff barriers significantly reduce the ability of imported goods to compete in the domestic market.” The question’s wording has varied slightly over the years.

Mean Tariff Rate 28% Gwartney et al. (2016) As the mean tariff rate increases, countries are assigned lower ratings. The rating declines toward zero as the mean tariff rate

Taxes on International Trade (percent of current revenue)

26% World Bank (2016)

Taxes on international trade include import duties, export duties, profits of export or import monopolies, exchange profits, and exchange taxes. Current revenue includes all revenue from taxes and nonrepayable receipts (other than grants) from the sale of land, intangible assets, government stocks, or fixed capital assets, or from capital transfers from nongovernmental sources. It also includes fines, fees, recoveries, inheritance taxes, and nonrecurrent levies on capital. Data are for central government and in percent of all current

Capital Account Restrictions 24% Gwartney et al. (2016)

Index based on two components: (i) Beginning with the year 2002, this sub- component is based on the question: “Foreign ownership of companies in your country is (1) rare, limited to minority stakes, and often prohibited in key sectors or (2) prevalent and encouraged”. For earlier years, this sub-component was based on two questions about “Access of citizens to foreign capital markets and foreign access to domestic capital markets”. (ii) Index based on the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions, including 13 different types of capital controls. It is constructed by subtracting the number of restrictions from 13 and multiplying the result by 10.

(2) De-jure economic globalization

(1) De-facto economic globalization

KOFEconomicGlobalizationIndex

KOF ECONOMIC GLOBALIZATION INDEX

MEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source

Financial

OpennessIndex

(LMF_OPEN)

ThisindexrepresentsthesumofTotalForeignAssestsandTotalForeignLiabilitiesin%GDP

CONTINUOUS %ofGDP 211 1970-2015

Equity-based

Financial

Integration

(LMF_EQ)

ThisindexrepresentsthesumofPortfolioEquityAssets(stocks)andPortfolioEquityLiabilities(stocks)

CONTINUOUS %ofGDP 211 1970-2015

PrivateFinancial

OpennessIndex

(OPEN_pv)

Theopen_pvIndexmakesadistinctionbetweenprivateandofficialfinancialopenness(LMF_open)bysubtractingofficialdevelopmentaid(DA)fromforeignliablities(FL)andinternationalreserves(IR)fromforeignassets(FA).Inthissense,privatefinancialopennessrepresentsprivateagents’willingnessandabilitytoinvestabroadandtoincurforeigndebt.

CONTINUOUS %ofGDP 190 1970-2014Steiner&Saadma

(2016)

ForeignDirect

Investment

liabilitiesstock

(FDI_inward)

TheinwardFDIstockrepresentsthevalueofforeigninvestors'equityinandnetloanstoenterprisesresidentinthereportingeconomy.

ForeignDirect

Investmentasset

stock

(FDI_outward)

TheoutwardFDIstockrepresentsthevalueoftheresidentinvestors'equityinandnetloanstoenterprisesinforeigneconomies.

Notes:*AREAER=AnnualReportonExchangeArrangementsandRestrictions(IMF)

FINANCIAL

DE-FACTO

Lane&Milesi-

Ferretti,2017

(publiclyavailable)

CONTINUOUS %ofGDP

190

(LMF)

179

(UNCTAD)

1970-2015

(LMF)

1980-2016

(UNCTAD)

Lane&Milesi-

Ferretti,2017

(publiclyavailable)

UNCTAD,2017

(publiclyavailable)

CLASSIFICATION OF FINANCIAL INDICES

CLASSIFICATION OF FINANCIAL INDICES

MEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source

Financial

OpennessIndex

(LMF_OPEN)

ThisindexrepresentsthesumofTotalForeignAssestsandTotalForeignLiabilitiesin%GDP

211 1970-2015

Equity-based

Financial

Integration

(LMF_EQ)

ThisindexrepresentsthesumofPortfolioEquityAssetsandLiabilities(stocks)

211 1970-2015

PrivateFinancial

OpennessIndex

(OPEN_pv)

Theopen_pvIndexmakesadistinctionbetweenprivateandofficialfinancialopenness(LMF_open)bysubtractingofficialdevelopmentaid(DA)fromforeignliablities(FL)andinternationalreserves(IR)fromforeignassets(FA).Inthissense,privatefinancialopennessrepresentsprivateagents’willingnessandabilitytoinvestabroadandtoincurforeigndebt.

190 1970-2014Steiner&Saadma

(2016)

ForeignDirect

Investment

liabilitiesstock

(FDI_inward)

TheinwardFDIstockrepresentsthevalueofforeigninvestors'equityinandnetloanstoenterprisesresidentinthereportingeconomy.

ForeignDirect

Investmentasset

stock

(FDI_outward)

TheoutwardFDIstockrepresentsthevalueoftheresidentinvestors'equityinandnetloanstoenterprisesinforeigneconomies.

Notes:*LMF=LaneandMilesi-Ferretti

FINANCIAL

DE-FACTO

Lane&Milesi-Ferretti,2017

(publiclyavailable,henceforthLMF)

190(LMF)

179(UNCTAD)

1970-2015(LMF*)

1980-2016(UNCTAD)

Lane&Miles-Ferretti,2017

(publiclyavailable)

UNCTAD,2017(publiclyavailable)

CONTINUOUS

%ofG

DP

CLASSIFICATION OF FINANCIAL INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source

Chinn-Ito-Index(KAOPEN)

Table-basedAREAER*measure:-presenceofmultipleexchangerates(k1)-restrictionsoncurrentaccounttransactions(k2)-restrictionsoncapitalaccounttransactions(k3)-therequirementofthesurrenderofexportproceeds(k4)

CONTINUOUSINTERVAL

-1.90–2.37 182 1970-2015

ChinnandIto,2017

(publiclyavailable)

FinancialCurrentAccount(FIN_CURRENT)

Text-basedAREAER*measureFIN_CURRENTisbasedonhowcompliantagovernmentiswithitsobligationsundertheIMF’sArticleVIIItofreefromgovernmentrestrictiontheproceedsfrominternationaltradeofgoodsandservices

DISCRETEORDINAL

0–1000–8

94 1950-2004

CapitalAccountLiberalization(CAPITAL)

Text-basedAREAER*measureCAPITALisbasedonrestrictionsoncapitaloutflowsandinflows,withadistinctionbetweenresidentsandnon-residents

DISCRETEORDINAL

0–1000–4

94 1950-2004

CapitalAccountRestrictions(KA_Index)

Text-basedAREAER*measureSimilarthanCAPITALandFIN_CURRENTbutincludesfiner-granedsub-categoriesandinformationaboutdifferenttypesofrestrictions,assetcategories,directionofflowsandresidencyofagents.

DISCRETEORDINAL

0–1 91 1995-2005Schindler,2009

(publiclyavailable)

FinancialCurrentandCapitalAccount(FOI)

Tableandtext-basedAREAER*measureThemostcomprehensiveAREAER*measure.TheFOIincludesinformationontwelvecategoriesofcurrentandcapitalaccounttransactions(moreseetext)

DISCRETEORDINAL

0–12 187 1965-2004 Brune(2006)

InvestmentFreedom(HF_fin)

Non-AREAER*measureIndexstartsfrom100andthenpointsaredeductedduetoapenaltycatalogue.Informationbasedonofficialcountrypublications,theEconomistandUSgovernmentagencies,butexactcoding/methodologyremainsunclear.

DISCRETEORDINAL

0–100 186 1995-2017

HeritageFoundation,

2017(publiclyavailable)

Equitymarketliberalizationindicator

Non-AREAER*measureThisbinaryliberalizationindexcorrespondstoadateofformalregulatorychangeafterwhichforeigninvestorsofficiallyhavetheopportunitytoinvestindomesticequitysecurities.

DISCRETEBINARY

0–1 96 1980-2006Bekaert,HarveyandLundblad,

2010

FDIRegulatoryRestrictivenessIndex(FDI_Restrictions)

BasedonfourmaintypesofrestrictionsonFDI:-Foreignequitylimitations-Discriminatoryscreeningorapprovalmechanisms-Restrictionsontheemploymentofforeignersaskeypersonnel-Otheroperationalrestrictions,e.g.restrictionsonbranchingandoncapitalrepatriationoronlandownershipbyforeign-owendenterprises

CONTINUOUS 0–1 62

(1997,2003,2006)

Yearlydata2010-2016

OECD,2017(publiclyavailable)

FINANCIAL

DE-JURE

Quinn&Toyoda,2008

(publiclyavailable)

Notes:*AREAER=AnnualReportonExchangeArrangementsandRestrictions(IMF)

CLASSIFICATION OF TRADE INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source

TradeOpennessIndex

Exports(X)+Imports(M)in%GDPCONTINUOUS

RATIO%GDP 200 1960-2016

WorldBank,2017(publiclyavailable)

GeneralizedTrade

OpennessIndex

TheIndexrepresentsthetradevolumeasashareofacountry'sGDPfactor,definedbyaCES-functionofitsownGDPandthe

GDPoftherestoftheworld

CONTINUOUSRATIO

ownscala 145 1995-2004 Tang,2011

CompositeTradeShare

TradeVolume(X+M)in%GDP,adjustedbytheWorldTradeShare(WTS)

CONTINUOUSRATIO

ownscala 186 2000 Squalli&Wilson,2011

KOFde-facto

AverageofActualFlows(KOF_defacto)-TradeVolume

-ForeignDirectInvestment,stocks-PortfolioInvestment

-IncomePaymentstoForeignNationals

KOFde-jure

AverageofRestrictions(KOF_dejure)-HiddenImportBarriers

-MeanTariffRate-TaxesonInternationalTrade-CapitalAccountRestrictions

KOFEconomicGlobalization

AverageofKOFde-facto andKOFde-jure

0–100 207 1970-2014Dreheret.al.,2017(publiclyavailable)

TRAD

E

DE-FAC

TO

HYBR

ID(com

biningtrad

ean

dfin

ancia

lmeasures)

CONTINUOUSINTERVAL

CLASSIFICATION OF TRADE INDICESMEASURE TYPE NAME VariablesofInterest DataType SCALE COUNTRIES YEARS Source

Sachs-Warnerindex

BinaryvariablebasedonWarner&Sachs(1995)criterion(seetextformoredetails)

DISCRETEBINARY

0–1 1183periodswitheacha10yearspan

SachsandWarner,1995ExtendedbyWacziarg&

Welch,2008andDollaret.al.,2017

TradeFreedom(HF_trade)

Trade-weightedaveragetariffrate–Nontarifftradebarriers(NTBs)

DISCRETEINTERVAL

0–100 186 1995-2017

Milleret.al.,2017:IndexofEconomicFreedom.HeritageFoundation(publiclyavailable)

TariffRates(Tariff_WITS)

100–MeanofEffectivelyApplied(AHS)andMost-FavoredNation(MFN)weightedaveragetariffrates

CONTINUOUSINTERVAL

0–100 168 1988-2016Owncalculations,2017(basedontariffdataof

WITSdatabank)

TariffRates(Tariff_RES)

100–Averageoftheeffectiverate(=tariffrevenue/importvalue)andtheaverageunweightedtariffrates

CONTINUOUSINTERVAL

0–100 44 1980-2004Jaumotteet.al.,2013

(publiclyavailable,basedonWTOdatabase)

FreedomtoTrade

Internationally(FTI_Index)

Indexbasedonfourcomponentsthatareweightedequallywithmax.pointsof10perarea;Thefinalscoreisaverageofthesumofthecategories:- Tariffs:–Revenuefromtradetaxes(%oftradesector)–Meantariffrate–Standarddeviationoftariffrates- Regulatorytradebarriers:–Non-tarifftradebarriers,–Compliancecostsofimportingandexporting- Blackmarketexchangerate- Controlsofthemovementofcapitalandpeople:–Foreignownership/investmentrestrictions–Capitalcontrols–Freedomofforeignerstovisit

CONTINUOUSINTERVAL

0–10 159

5-yearmeasure:1970-2000

Yearlydata2000-2015

Gwartneyet.al,2017:EconomicFreedomofthe

World:2017AnnualReport.FraserInstitute.

(publiclyavailable)

TRAD

E

DE-JURE

3060

9012

015

0Tr

ade

% G

DP

1970 1980 1990 2000 2010 2020Year

de-facto

020

4060

8010

0Tr

ade

Free

dom

1970 1980 1990 2000 2010 2020Year

de-jureTrade Openness

High complexity countries Moderate complexity countriesLow complexity countries

100

300

500

700

Fore

ign

tota

l sto

cks

% G

DP

1970 1980 1990 2000 2010Year

de-facto

2040

6080

100

KA O

PEN

1970 1980 1990 2000 2010Year

de-jureFinancial Openness

High complexity countries Moderate complexity countriesLow complexity countries

0.94 0.95 0.37 0.22 0.18 0.3 0.27 0.29 0.25 0.44 0.23 0.42 0.21 0.21 0.24 0.26 0.28 0 0.22 0.67 0.33 0.57

0.94 0.77 0.38 0.24 0.2 0.3 0.3 0.33 0.29 0.42 0.25 0.41 0.24 0.2 0.28 0.27 0.3 0.02 0.24 0.7 0.36 0.6

0.95 0.77 0.34 0.19 0.16 0.27 0.2 0.23 0.19 0.4 0.18 0.38 0.15 0.2 0.16 0.23 0.26 −0.02 0.17 0.55 0.27 0.48

0.37 0.38 0.34 0.61 0.57 0.71 0.11 0.11 0.13 0.2 0.15 0.25 0.13 0.43 0.69 0.78 0.77 0.72 0.66 0.55 0.82 0.78

0.22 0.24 0.19 0.61 0.69 0.65 0.06 0.05 0.11 0.16 0.14 0.23 0.14 0.52 0.51 0.6 0.62 0.52 0.43 0.38 0.68 0.63

0.18 0.2 0.16 0.57 0.69 0.79 −0.08 0.01 −0.05 0.05 −0.07 0.24 −0.06 0.17 0.37 0.43 0.41 0.36 0.22 0.24 0.6 0.54

0.3 0.3 0.27 0.71 0.65 0.79 0.24 0.26 0.2 0.19 0.23 0.29 0.26 0.42 0.49 0.56 0.58 0.5 0.36 0.38 0.61 0.58

0.27 0.3 0.2 0.11 0.06 −0.08 0.24 0.98 0.84 0.31 0.52 0.39 0.49 0.16 0.06 −0.01 0.07 0.25 0.18 0.22 0.04 0.16

0.29 0.33 0.23 0.11 0.05 0.01 0.26 0.98 0.73 0.24 0.65 0.35 0.66 0.16 0.05 −0.02 0.06 0.26 0.18 0.24 0.05 0.17

0.25 0.29 0.19 0.13 0.11 −0.05 0.2 0.84 0.73 0.24 0.74 0.33 0.75 0.15 0.24 0.37 0.35 0.27 0.18 0.15 0.15 0.19

0.44 0.42 0.4 0.2 0.16 0.05 0.19 0.31 0.24 0.24 0.96 0.99 0.98 0.25 0.15 0.19 0.14 0.12 0.15 0.36 0.18 0.31

0.23 0.25 0.18 0.15 0.14 −0.07 0.23 0.52 0.65 0.74 0.96 0.94 0.99 0.14 0.16 0.2 0.16 0.2 0.2 0.18 0.15 0.22

0.42 0.41 0.38 0.25 0.23 0.24 0.29 0.39 0.35 0.33 0.99 0.94 0.98 0.25 0.21 0.22 0.17 0.29 0.24 0.33 0.25 0.34

0.21 0.24 0.15 0.13 0.14 −0.06 0.26 0.49 0.66 0.75 0.98 0.99 0.98 0.14 0.18 0.35 0.32 0.27 0.2 0.13 0.14 0.19

0.21 0.2 0.2 0.43 0.52 0.17 0.42 0.16 0.16 0.15 0.25 0.14 0.25 0.14 0.46 0.53 0.41 0.64 0.59 0.39 0.49 0.5

0.24 0.28 0.16 0.69 0.51 0.37 0.49 0.06 0.05 0.24 0.15 0.16 0.21 0.18 0.46 0.78 0.8 0.8 0.53 0.41 0.68 0.65

0.26 0.27 0.23 0.78 0.6 0.43 0.56 −0.01 −0.02 0.37 0.19 0.2 0.22 0.35 0.53 0.78 0.85 0.88 0.48 0.45 0.68 0.67

0.28 0.3 0.26 0.77 0.62 0.41 0.58 0.07 0.06 0.35 0.14 0.16 0.17 0.32 0.41 0.8 0.85 0.74 0.45 0.45 0.65 0.65

0 0.02 −0.02 0.72 0.52 0.36 0.5 0.25 0.26 0.27 0.12 0.2 0.29 0.27 0.64 0.8 0.88 0.74 0.36 0.27 0.58 0.49

0.22 0.24 0.17 0.66 0.43 0.22 0.36 0.18 0.18 0.18 0.15 0.2 0.24 0.2 0.59 0.53 0.48 0.45 0.36 0.37 0.52 0.54

0.67 0.7 0.55 0.55 0.38 0.24 0.38 0.22 0.24 0.15 0.36 0.18 0.33 0.13 0.39 0.41 0.45 0.45 0.27 0.37 0.51 0.86

0.33 0.36 0.27 0.82 0.68 0.6 0.61 0.04 0.05 0.15 0.18 0.15 0.25 0.14 0.49 0.68 0.68 0.65 0.58 0.52 0.51 0.88

0.57 0.6 0.48 0.78 0.63 0.54 0.58 0.16 0.17 0.19 0.31 0.22 0.34 0.19 0.5 0.65 0.67 0.65 0.49 0.54 0.86 0.88

Trade_GDP

X_GDP

M_GDP

FTI_Index

HF_trade

Tariff_WITS

Tariff_RES

Total_stocks

Private_total_stocks

Portfolio_equity_stocks

FDI_inward_UNCTAD

FDI_inward_LMF

FDI_outward_UNCTAD

FDI_outward_LMF

FDI_Restrictions_OECD

KAOPEN

CAPITAL

FIN_CUR

KA_Index

HF_fin

KOF_defacto

KOF_dejure

KOF_econ

Trade_G

DPX_G

DPM_G

DP

FTI_Ind

ex

HF_trad

e

Tariff_W

ITS

Tariff_R

ES

Total_st

ocks

Private_

total_st

ocks

Portfoli

o_equit

y_stock

s

FDI_inw

ard_UNC

TAD

FDI_inw

ard_LMF

FDI_ou

tward_U

NCTAD

FDI_ou

tward_L

MF

FDI_Re

striction

s_OECD

KAOPEN

CAPITAL

FIN_CU

RKA_

IndexHF_

fin

KOF_de

facto

KOF_de

jure

KOF_ec

on

Correlation of all indices

Tradede-facto

Tradede-jure

Financialde-facto

Financialde-jure

Hybrid

MAIN FINDINGS OF CORRELATIONANALYSIS

Strong correla,on within four major groups¢

Weak/Moderate correla,on across dimensions:¢

Weak: £ trade dimension Weak: £ financial dimensionWeak: £ de-facto dimension Moderate: £ de-jure dimension

KOF¢ -Econ as the only real hybrid measure:

Moderate correla,on with all groups except de£ -facto financial

economic globalization and its effect on income...

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