social globalization research paper

Click through the PLOS taxonomy to find articles in your field.

For more information about PLOS Subject Areas, click here .

Loading metrics

Open Access

Peer-reviewed

Research Article

Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities

* E-mail: [email protected]

Affiliations Faculty of Management, Universiti Teknologi Malaysia (UTM), Johor, Malaysia, Department of Management, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran

Affiliation Applied Statistics Department, Economics and Administration Faculty, University of Malaya, Kuala Lumpur, Malaysia

• Parisa Samimi, 
• Hashem Salarzadeh Jenatabadi

• Published: April 10, 2014
• https://doi.org/10.1371/journal.pone.0087824
• Reader Comments

This study was carried out to investigate the effect of economic globalization on economic growth in OIC countries. Furthermore, the study examined the effect of complementary policies on the growth effect of globalization. It also investigated whether the growth effect of globalization depends on the income level of countries. Utilizing the generalized method of moments (GMM) estimator within the framework of a dynamic panel data approach, we provide evidence which suggests that economic globalization has statistically significant impact on economic growth in OIC countries. The results indicate that this positive effect is increased in the countries with better-educated workers and well-developed financial systems. Our finding shows that the effect of economic globalization also depends on the country’s level of income. High and middle-income countries benefit from globalization whereas low-income countries do not gain from it. In fact, the countries should receive the appropriate income level to be benefited from globalization. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

Citation: Samimi P, Jenatabadi HS (2014) Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities. PLoS ONE 9(4): e87824. https://doi.org/10.1371/journal.pone.0087824

Editor: Rodrigo Huerta-Quintanilla, Cinvestav-Merida, Mexico

Received: November 5, 2013; Accepted: January 2, 2014; Published: April 10, 2014

Copyright: © 2014 Samimi, Jenatabadi. This is an open-access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Funding: The study is supported by the Ministry of Higher Education of Malaysia, Malaysian International Scholarship (MIS). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.

Competing interests: The authors have declared that no competing interests exist.

Introduction

Globalization, as a complicated process, is not a new phenomenon and our world has experienced its effects on different aspects of lives such as economical, social, environmental and political from many years ago [1] – [4] . Economic globalization includes flows of goods and services across borders, international capital flows, reduction in tariffs and trade barriers, immigration, and the spread of technology, and knowledge beyond borders. It is source of much debate and conflict like any source of great power.

The broad effects of globalization on different aspects of life grab a great deal of attention over the past three decades. As countries, especially developing countries are speeding up their openness in recent years the concern about globalization and its different effects on economic growth, poverty, inequality, environment and cultural dominance are increased. As a significant subset of the developing world, Organization of Islamic Cooperation (OIC) countries are also faced by opportunities and costs of globalization. Figure 1 shows the upward trend of economic globalization among different income group of OIC countries.

• PPT PowerPoint slide
• PNG larger image
• TIFF original image

https://doi.org/10.1371/journal.pone.0087824.g001

Although OICs are rich in natural resources, these resources were not being used efficiently. It seems that finding new ways to use the OICs economic capacity more efficiently are important and necessary for them to improve their economic situation in the world. Among the areas where globalization is thought, the link between economic growth and globalization has been become focus of attention by many researchers. Improving economic growth is the aim of policy makers as it shows the success of nations. Due to the increasing trend of globalization, finding the effect of globalization on economic growth is prominent.

The net effect of globalization on economic growth remains puzzling since previous empirical analysis did not support the existent of a systematic positive or negative impact of globalization on growth. Most of these studies suffer from econometrics shortcoming, narrow definition of globalization and small number of countries. The effect of economic globalization on the economic growth in OICs is also ambiguous. Existing empirical studies have not indicated the positive or negative impact of globalization in OICs. The relationship between economic globalization and economic growth is important especially for economic policies.

Recently, researchers have claimed that the growth effects of globalization depend on the economic structure of the countries during the process of globalization. The impact of globalization on economic growth of countries also could be changed by the set of complementary policies such as improvement in human capital and financial system. In fact, globalization by itself does not increase or decrease economic growth. The effect of complementary policies is very important as it helps countries to be successful in globalization process.

In this paper, we examine the relationship between economic globalization and growth in panel of selected OIC countries over the period 1980–2008. Furthermore, we would explore whether the growth effects of economic globalization depend on the set of complementary policies and income level of OIC countries.

The paper is organized as follows. The next section consists of a review of relevant studies on the impact of globalization on growth. Afterward the model specification is described. It is followed by the methodology of this study as well as the data sets that are utilized in the estimation of the model and the empirical strategy. Then, the econometric results are reported and discussed. The last section summarizes and concludes the paper with important issues on policy implications.

Literature Review

The relationship between globalization and growth is a heated and highly debated topic on the growth and development literature. Yet, this issue is far from being resolved. Theoretical growth studies report at best a contradictory and inconclusive discussion on the relationship between globalization and growth. Some of the studies found positive the effect of globalization on growth through effective allocation of domestic resources, diffusion of technology, improvement in factor productivity and augmentation of capital [5] , [6] . In contrast, others argued that globalization has harmful effect on growth in countries with weak institutions and political instability and in countries, which specialized in ineffective activities in the process of globalization [5] , [7] , [8] .

Given the conflicting theoretical views, many studies have been empirically examined the impact of the globalization on economic growth in developed and developing countries. Generally, the literature on the globalization-economic growth nexus provides at least three schools of thought. First, many studies support the idea that globalization accentuates economic growth [9] – [19] . Pioneering early studies include Dollar [9] , Sachs et al. [15] and Edwards [11] , who examined the impact of trade openness by using different index on economic growth. The findings of these studies implied that openness is associated with more rapid growth.

In 2006, Dreher introduced a new comprehensive index of globalization, KOF, to examine the impact of globalization on growth in an unbalanced dynamic panel of 123 countries between 1970 and 2000. The overall result showed that globalization promotes economic growth. The economic and social dimensions have positive impact on growth whereas political dimension has no effect on growth. The robustness of the results of Dreher [19] is approved by Rao and Vadlamannati [20] which use KOF and examine its impact on growth rate of 21 African countries during 1970–2005. The positive effect of globalization on economic growth is also confirmed by the extreme bounds analysis. The result indicated that the positive effect of globalization on growth is larger than the effect of investment on growth.

The second school of thought, which supported by some scholars such as Alesina et al. [21] , Rodrik [22] and Rodriguez and Rodrik [23] , has been more reserve in supporting the globalization-led growth nexus. Rodriguez and Rodrik [23] challenged the robustness of Dollar (1992), Sachs, Warner et al. (1995) and Edwards [11] studies. They believed that weak evidence support the idea of positive relationship between openness and growth. They mentioned the lack of control for some prominent growth indicators as well as using incomprehensive trade openness index as shortcomings of these works. Warner [24] refuted the results of Rodriguez and Rodrik (2000). He mentioned that Rodriguez and Rodrik (2000) used an uncommon index to measure trade restriction (tariffs revenues divided by imports). Warner (2003) explained that they ignored all other barriers on trade and suggested using only the tariffs and quotas of textbook trade policy to measure trade restriction in countries.

Krugman [25] strongly disagreed with the argument that international financial integration is a major engine of economic development. This is because capital is not an important factor to increase economic development and the large flows of capital from rich to poor countries have never occurred. Therefore, developing countries are unlikely to increase economic growth through financial openness. Levine [26] was more optimistic about the impact of financial liberalization than Krugman. He concluded, based on theory and empirical evidences, that the domestic financial system has a prominent effect on economic growth through boosting total factor productivity. The factors that improve the functioning of domestic financial markets and banks like financial integration can stimulate improvements in resource allocation and boost economic growth.

The third school of thoughts covers the studies that found nonlinear relationship between globalization and growth with emphasis on the effect of complementary policies. Borensztein, De Gregorio et al. (1998) investigated the impact of FDI on economic growth in a cross-country framework by developing a model of endogenous growth to examine the role of FDI in the economic growth in developing countries. They found that FDI, which is measured by the fraction of products produced by foreign firms in the total number of products, reduces the costs of introducing new varieties of capital goods, thus increasing the rate at which new capital goods are introduced. The results showed a strong complementary effect between stock of human capital and FDI to enhance economic growth. They interpreted this finding with the observation that the advanced technology, brought by FDI, increases the growth rate of host economy when the country has sufficient level of human capital. In this situation, the FDI is more productive than domestic investment.

Calderón and Poggio [27] examined the structural factors that may have impact on growth effect of trade openness. The growth benefits of rising trade openness are conditional on the level of progress in structural areas including education, innovation, infrastructure, institutions, the regulatory framework, and financial development. Indeed, they found that the lack of progress in these areas could restrict the potential benefits of trade openness. Chang et al. [28] found that the growth effects of openness may be significantly improved when the investment in human capital is stronger, financial markets are deeper, price inflation is lower, and public infrastructure is more readily available. Gu and Dong [29] emphasized that the harmful or useful growth effect of financial globalization heavily depends on the level of financial development of economies. In fact, if financial openness happens without any improvement in the financial system of countries, growth will replace by volatility.

However, the review of the empirical literature indicates that the impact of the economic globalization on economic growth is influenced by sample, econometric techniques, period specifications, observed and unobserved country-specific effects. Most of the literature in the field of globalization, concentrates on the effect of trade or foreign capital volume (de facto indices) on economic growth. The problem is that de facto indices do not proportionally capture trade and financial globalization policies. The rate of protections and tariff need to be accounted since they are policy based variables, capturing the severity of trade restrictions in a country. Therefore, globalization index should contain trade and capital restrictions as well as trade and capital volume. Thus, this paper avoids this problem by using a comprehensive index which called KOF [30] . The economic dimension of this index captures the volume and restriction of trade and capital flow of countries.

Despite the numerous studies, the effect of economic globalization on economic growth in OIC is still scarce. The results of recent studies on the effect of globalization in OICs are not significant, as they have not examined the impact of globalization by empirical model such as Zeinelabdin [31] and Dabour [32] . Those that used empirical model, investigated the effect of globalization for one country such as Ates [33] and Oyvat [34] , or did it for some OIC members in different groups such as East Asia by Guillaumin [35] or as group of developing countries by Haddad et al. [36] and Warner [24] . Therefore, the aim of this study is filling the gap in research devoted solely to investigate the effects of economic globalization on growth in selected OICs. In addition, the study will consider the impact of complimentary polices on the growth effects of globalization in selected OIC countries.

Model Specification

Methodology and Data

This paper applies the generalized method of moments (GMM) panel estimator first suggested by Anderson and Hsiao [38] and later developed further by Arellano and Bond [39] . This flexible method requires only weak assumption that makes it one of the most widely used econometric techniques especially in growth studies. The dynamic GMM procedure is as follow: first, to eliminate the individual effect form dynamic growth model, the method takes differences. Then, it instruments the right hand side variables by using their lagged values. The last step is to eliminate the inconsistency arising from the endogeneity of the explanatory variables.

The consistency of the GMM estimator depends on two specification tests. The first is a Sargan test of over-identifying restrictions, which tests the overall validity of the instruments. Failure to reject the null hypothesis gives support to the model. The second test examines the null hypothesis that the error term is not serially correlated.

The GMM can be applied in one- or two-step variants. The one-step estimators use weighting matrices that are independent of estimated parameters, whereas the two-step GMM estimator uses the so-called optimal weighting matrices in which the moment conditions are weighted by a consistent estimate of their covariance matrix. However, the use of the two-step estimator in small samples, as in our study, has problem derived from proliferation of instruments. Furthermore, the estimated standard errors of the two-step GMM estimator tend to be small. Consequently, this paper employs the one-step GMM estimator.

In the specification, year dummies are used as instrument variable because other regressors are not strictly exogenous. The maximum lags length of independent variable which used as instrument is 2 to select the optimal lag, the AR(1) and AR(2) statistics are employed. There is convincing evidence that too many moment conditions introduce bias while increasing efficiency. It is, therefore, suggested that a subset of these moment conditions can be used to take advantage of the trade-off between the reduction in bias and the loss in efficiency. We restrict the moment conditions to a maximum of two lags on the dependent variable.

Data and Empirical Strategy

We estimated Eq. (1) using the GMM estimator based on a panel of 33 OIC countries. Table S1 in File S1 lists the countries and their income groups in the sample. The choice of countries selected for this study is primarily dictated by availability of reliable data over the sample period among all OIC countries. The panel covers the period 1980–2008 and is unbalanced. Following [40] , we use annual data in order to maximize sample size and to identify the parameters of interest more precisely. In fact, averaging out data removes useful variation from the data, which could help to identify the parameters of interest with more precision.

The dependent variable in our sample is logged per capita real GDP, using the purchasing power parity (PPP) exchange rates and is obtained from the Penn World Table (PWT 7.0). The economic dimension of KOF index is derived from Dreher et al. [41] . We use some other variables, along with economic globalization to control other factors influenced economic growth. Table S2 in File S2 shows the variables, their proxies and source that they obtain.

We relied on the three main approaches to capture the effects of economic globalization on economic growth in OIC countries. The first one is the baseline specification (Eq. (1)) which estimates the effect of economic globalization on economic growth.

The second approach is to examine whether the effect of globalization on growth depends on the complementary policies in the form of level of human capital and financial development. To test, the interactions of economic globalization and financial development (KOF*FD) and economic globalization and human capital (KOF*HCS) are included as additional explanatory variables, apart from the standard variables used in the growth equation. The KOF, HCS and FD are included in the model individually as well for two reasons. First, the significance of the interaction term may be the result of the omission of these variables by themselves. Thus, in that way, it can be tested jointly whether these variables affect growth by themselves or through the interaction term. Second, to ensure that the interaction term did not proxy for KOF, HCS or FD, these variables were included in the regression independently.

In the third approach, in order to study the role of income level of countries on the growth effect of globalization, the countries are split based on income level. Accordingly, countries were classified into three groups: high-income countries (3), middle-income (21) and low-income (9) countries. Next, dummy variables were created for high-income (Dum 3), middle-income (Dum 2) and low-income (Dum 1) groups. Then interaction terms were created for dummy variables and KOF. These interactions will be added to the baseline specification.

Findings and Discussion

This section presents the empirical results of three approaches, based on the GMM -dynamic panel data; in Tables 1 – 3 . Table 1 presents a preliminary analysis on the effects of economic globalization on growth. Table 2 displays coefficient estimates obtained from the baseline specification, which used added two interaction terms of economic globalization and financial development and economic globalization and human capital. Table 3 reports the coefficients estimate from a specification that uses dummies to capture the impact of income level of OIC countries on the growth effect of globalization.

https://doi.org/10.1371/journal.pone.0087824.t001

https://doi.org/10.1371/journal.pone.0087824.t002

https://doi.org/10.1371/journal.pone.0087824.t003

The results in Table 1 indicate that economic globalization has positive impact on growth and the coefficient is significant at 1 percent level. The positive effect is consistent with the bulk of the existing empirical literature that support beneficial effect of globalization on economic growth [9] , [11] , [13] , [19] , [42] , [43] .

According to the theoretical literature, globalization enhances economic growth by allocating resources more efficiently as OIC countries that can be specialized in activities with comparative advantages. By increasing the size of markets through globalization, these countries can be benefited from economic of scale, lower cost of research and knowledge spillovers. It also augments capital in OICs as they provide a higher return to capital. It has raised productivity and innovation, supported the spread of knowledge and new technologies as the important factors in the process of development. The results also indicate that growth is enhanced by lower level of government expenditure, lower level of inflation, higher level of human capital, deeper financial development, more domestic investment and better institutions.

Table 2 represents that the coefficients on the interaction between the KOF, HCS and FD are statistically significant at 1% level and with the positive sign. The findings indicate that economic globalization not only directly promotes growth but also indirectly does via complementary reforms. On the other hand, the positive effect of economic globalization can be significantly enhanced if some complementary reforms in terms of human capital and financial development are undertaken.

In fact, the implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. However, countries with higher level of human capital can be better and faster to imitate and implement the transferred technologies. Besides, the financial openness brings along the knowledge and managerial for implementing the new technology. It can be helpful in improving the level of human capital in host countries. Moreover, the strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in developing countries. Overall, with higher level of human capital and stronger financial systems, the globalized countries benefit from the growth effect of globalization. The obtained results supported by previous studies in relative to financial and trade globalization such as [5] , [27] , [44] , [45] .

Table (3 ) shows that the estimated coefficients on KOF*dum3 and KOF*dum2 are statistically significant at the 5% level with positive sign. The KOF*dum1 is statistically significant with negative sign. It means that increase in economic globalization in high and middle-income countries boost economic growth but this effect is diverse for low-income countries. The reason might be related to economic structure of these countries that are not received to the initial condition necessary to be benefited from globalization. In fact, countries should be received to the appropriate income level to be benefited by globalization.

The diagnostic tests in tables 1 – 3 show that the estimated equation is free from simultaneity bias and second-order correlation. The results of Sargan test accept the null hypothesis that supports the validity of the instrument use in dynamic GMM.

Conclusions and Implications

Numerous researchers have investigated the impact of economic globalization on economic growth. Unfortunately, theoretical and the empirical literature have produced conflicting conclusions that need more investigation. The current study shed light on the growth effect of globalization by using a comprehensive index for globalization and applying a robust econometrics technique. Specifically, this paper assesses whether the growth effects of globalization depend on the complementary polices as well as income level of OIC countries.

Using a panel data of OIC countries over the 1980–2008 period, we draw three important conclusions from the empirical analysis. First, the coefficient measuring the effect of the economic globalization on growth was positive and significant, indicating that economic globalization affects economic growth of OIC countries in a positive way. Second, the positive effect of globalization on growth is increased in countries with higher level of human capital and deeper financial development. Finally, economic globalization does affect growth, whether the effect is beneficial depends on the level of income of each group. It means that economies should have some initial condition to be benefited from the positive effects of globalization. The results explain why some countries have been successful in globalizing world and others not.

The findings of our study suggest that public policies designed to integrate to the world might are not optimal for economic growth by itself. Economic globalization not only directly promotes growth but also indirectly does so via complementary reforms.

The policy implications of this study are relatively straightforward. Integrating to the global economy is only one part of the story. The other is how to benefits more from globalization. In this respect, the responsibility of policymakers is to improve the level of educated workers and strength of financial systems to get more opportunities from globalization. These economic policies are important not only in their own right, but also in helping developing countries to derive the benefits of globalization.

However, implementation of new technologies transferred from advanced economies requires skilled workers. The results of this study confirm the importance of increasing educated workers as a complementary policy in progressing globalization. In fact, countries with higher level of human capital can better and faster imitate and implement the transferred technologies. The higher level of human capital and certain skill of human capital determine whether technology is successfully absorbed across countries. This shows the importance of human capital in the success of countries in the globalizing world.

Financial openness in the form of FDI brings along the knowledge and managerial for implementing the new technology. It can be helpful in upgrading the level of human capital in host countries. Moreover, strong and well-functioned financial systems can lead the flow of foreign capital to the productive and compatible sectors in OICs.

In addition, the results show that economic globalization does affect growth, whether the effect is beneficial depends on the level of income of countries. High and middle income countries benefit from globalization whereas low-income countries do not gain from it. As Birdsall [46] mentioned globalization is fundamentally asymmetric for poor countries, because their economic structure and markets are asymmetric. So, the risks of globalization hurt the poor more. The structure of the export of low-income countries heavily depends on primary commodity and natural resource which make them vulnerable to the global shocks.

The major research limitation of this study was the failure to collect data for all OIC countries. Therefore future research for all OIC countries would shed light on the relationship between economic globalization and economic growth.

Supporting Information

Sample of Countries.

https://doi.org/10.1371/journal.pone.0087824.s001

The Name and Definition of Indicators.

https://doi.org/10.1371/journal.pone.0087824.s002

Author Contributions

Conceived and designed the experiments: PS. Performed the experiments: PS. Analyzed the data: PS. Contributed reagents/materials/analysis tools: PS HSJ. Wrote the paper: PS HSJ.

• View Article
• Google Scholar
• 2. Bhandari AK, Heshmati A (2005) Measurement of Globalization and its Variations among Countries, Regions and over Time. IZA Discussion Paper No.1578.
• 3. Collins W, Williamson J (1999) Capital goods prices, global capital markets and accumulation: 1870–1950. NBER Working Paper No.7145.
• 4. Obstfeld M, Taylor A (1997) The great depression as a watershed: international capital mobility over the long run. In: D M, Bordo CG, and Eugene N White, editors. The Defining Moment: The Great Depression and the American Economy in the Twentieth Century. Chicago and London: University of Chicago Press: NBER Project Report series. 353–402.
• 7. De Melo J, Gourdon J, Maystre N (2008) Openness, Inequality and Poverty: Endowments Matter. World Bank Policy Research Working Paper No.3981.
• 8. Berg A, Krueger AO (2003) Trade, growth, and poverty: a selective survey. IMF Working Papers No.1047.
• 16. Barro R, Sala-i-Martin X (2004) Economic Growth. New York: McGraw Hill.
• 21. Alesina A, Grilli V, Milesi-Ferretti G, Center L, del Tesoro M (1994) The political economy of capital controls. In: Leiderman L, Razin A, editors. Capital Mobility: The Impact on Consumption, Investment and Growth. Cambridge: Cambridge University Press. 289–321.
• 22. Rodrik D (1998) Who needs capital-account convertibility? In: Fischer S, editor. Should the IMF Pursue Capital Account Convertibility?, Essays in international finance. Princeton: Department of Economics, Princeton University. 55–65.
• 25. Krugman P (1993) International Finance and Economic Development. In: Giovannini A, editor. Finance and Development: Issues and Experience. Cambridge Cambridge University Press. 11–24.
• 27. Calderón C, Poggio V (2010) Trade and Economic Growth Evidence on the Role of Complementarities for CAFTA-DR Countries. World Bank Policy Research, Working Paper No.5426.
• 30. Samimi P, Lim GC, Buang AA (2011) Globalization Measurement: Notes on Common Globalization Indexes. Knowledge Management, Economics and Information Technology 1(7).
• 36. Haddad ME, Lim JJ, Saborowski C (2010) Trade Openness Reduces Growth Volatility When Countries are Well Diversified. Policy Research Working Paper Series NO. 5222.
• 37. Mammi I (2012) Essays in GMM estimation of dynamic panel data models. Lucca, Italy: IMT Institute for Advanced Studies.
• 41. Dreher A, Gaston N, Martens P (2008) Measuring globalisation: Gauging its consequences: Springer Verlag.
• 42. Brunner A (2003) The long-run effects of trade on income and income growth. IMF Working Papers No. 03/37.
• 44. Alfaro L, Chanda A, Kalemli-Ozcan S, Sayek S (2006) How does foreign direct investment promote economic growth? Exploring the effects of financial markets on linkages. National Bureau of Economic Research working paper.
• 46. Birdsall N (2002) A stormy day on an open field: asymmetry and convergence in the global economy. In: Gruen D, O'Brien T, Lawson J, editors. Globalisation, living standards and inequality. Sydney: Reserve Bank of Australia and Australian. 66–87.
• 47. Solt F (2009) Standardizing the World Income Inequality Database. Social Science Quarterly 90: 231–242 SWIID Version 233.230, July 2010.
• 48. Beck T, Demirgüç-Kunt A, Levine R (2009) Financial Institutions and Markets across Countries and over Time. Policy Research Working Paper No.4943.

Advertisement

Global Evidence on the Impact of Globalization, Governance, and Financial Development on Economic Growth

• Published: 22 December 2023

Cite this article

• Ijaz Uddin 1 &
• Muhammad Azam Khan 1  

335 Accesses

Explore all metrics

We examined the impact of globalization, governance, and financial development on per capita income representing economic growth for 156 countries across the globe during 2002–2018. The analysis is categorized into full samples, and sub samples (i.e., low, lower, upper middle-, & high-income countries). The empirical methodology consists of 1 st and 2 nd generation panel unit root tests, panel co-integration test, Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and panel Dumitrescu Hurlin Granger causality test. The FMOLS and DOLS estimate indicated that financial development and human capital had a positive effect on economic growth for lower-income, lower-middle-income, upper-middle-income, high-income countries, and full sample. Governance factor namely control of corruption has a positive effect on economic growth in all income groups’ countries except lower-middle-income and full sample. The impact of governance factors namely political stability & absence of violence had a positive effect on economic growth in all income groups’ countries and full sample except upper-middle-income countries. Likewise, globalization had a positive effect on economic growth for all income groups’ countries, except full sample. These findings suggest that the developed financial sector, good governance, and globalization need to be strengthened to boost economic growth.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price includes VAT (Russian Federation)

Instant access to the full article PDF.

Rent this article via DeepDyve

Institutional subscriptions

Similar content being viewed by others

The Relationship Between Income Inequality and Economic Growth: Are Transmission Channels Effective?

Estimating the effects of Syrian civil war

Information and Communication Technology (ICT), Growth and Development in Developing Regions: Evidence from a Comparative Analysis and a New Approach

Data availability.

Data used in this study for empirical examination have been obtained from the World Development Indicators ( 2021 ), the World Bank database, and World Governance Indicators ( 2021 ), the World Bank.

Acemoglu, D., Johnson, S., & Robinson, J. (2002). The rise of Europe: Atlantic trade, institutional change and economic growth (0898–2937).

Acemoglu, D., & Robinson, J. A. (2010). Why is Africa poor? Economic History of Developing Regions, 25 (1), 21–50.

Article   Google Scholar  

Ahmad, M. (2019). Globalization, economic growth, and spillovers: A spatial analysis. Margin: The Journal of Applied Economic Research, 13 (3), 255–276.

Ahmed, F., Kousar, S., Pervaiz, A., & Shabbir, A. (2022). Do institutional quality and financial development affect sustainable economic growth? Evidence from South Asian countries. Borsa Istanbul Review, 22 (1), 189–196.

Aisen, A., & Veiga, F. J. (2013). How does political instability affect economic growth? European Journal of Political Economy, 29 , 151–167.

Alesina, A., & Perotti, R. (1996). Income distribution, political instability, and investment. European Economic Review, 40 (6), 1203–1228.

Alexiou, C., Vogiazas, S., & Nellis, J. G. (2018). Reassessing the relationship between the financial sector and economic growth: Dynamic panel evidence. International Journal of Finance & Economics, 23 (2), 155–173. https://doi.org/10.1002/ijfe.1609

Aminu, A. W., Mohammed, B. S., & Shuaibu, H. (2022). Good governance and economic growth in Africa. AZKA International Journal of Zakat & Social Finance , 134–146. https://doi.org/10.51377/azjaf.vol3no1.98

Arif, I., & Khan, L. (2019). The role of financial development in human capital development: An evidence from Pakistan. Pakistan Journal of Commerce and Social Sciences, 13 (4), 1029–1040.

Google Scholar  

Awan, R. U., Akhtar, T., Rahim, S., Sher, F., & Cheema, A. R. (2018). Governance, corruption and economic growth: A panel data analysis of selected SAARC countries. Pakistan Economic and Social Review, 56 (1), 1–20.

Azam, M. (2016). Does governance and foreign capital inflows affect economic development in OIC countries. Journal of Economic Cooperation and Development, 37 (4), 21–50.

Azam, M. (2020). Energy and economic growth in developing Asian economies. Journal of the Asia Pacific Economy, 25 (3), 447–471. https://doi.org/10.1080/13547860.2019.1665328

Azam, M. (2021). Governance and economic growth: Evidence from 14 Latin America and Caribbean Countries. Journal of Knowledge Economy . https://doi.org/10.1007/s13132-021-00781-2

Azam, M., & Emirullah, C. (2014). The role of governance in economic development: Evidence from some selected countries in Asia and the Pacific. International Journal of Social Economics, 41 (12), 1265–1278.

Azam, M., Uddin, I., Khan, S., & Tariq, M. (2022). Are globalization, urbanization, and energy consumption cause carbon emissions in SAARC region? New evidence from CS-ARDL approach. Environmental Science and Pollution Research, 29 (58), 87746–87763.

Barry, A. (2012). Political situations: Knowledge controversies in transnational governance. Critical Policy Studies, 6 (3), 324–336. https://doi.org/10.1080/19460171.2012.699234

Bencivenga, V. R., & Smith, B. D. (1991). Financial intermediation and endogenous growth. The Review of Economic Studies, 58 (2), 195–209.

Bhagwati, J. N. (2004). Anti-globalization: Why? Journal of Policy Modeling, 26 (4), 439–463.

Campos, N. F., & Karanasos, M. G. (2008). Growth, volatility and political instability: Non-linear time-series evidence for Argentina, 1896–2000. Economics Letters, 100 (1), 135–137.

Chang, C. -P., & Lee, C. -C. (2010). Globalization and economic growth: A political economy analysis for OECD countries. Global Economic Review, 39 (2), 151–173.

Cook, P., & Kirkpatrick, C. (1997). Globalization, regionalization and third world development. Regional Studies, 31 (1), 55–66.

Demetriades, P., & Hook Law, S. (2006). Finance, institutions and economic development. International Journal of Finance & Economics, 11 (3), 245–260. https://doi.org/10.1002/ijfe.296

Dogan, E., Altinoz, B., Madaleno, M., & Taskin, D. (2020). The impact of renewable energy consumption to economic growth: A replication and extension of. Energy Economics, 90 , 104866. https://doi.org/10.1016/j.eneco.2020.104866

Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38 (10), 1091–1110. https://doi.org/10.1080/00036840500392078

Duan, C., Zhou, Y., Cai, Y., Gong, W., Zhao, C., & Ai, J. (2022). Investigate the impact of human capital, economic freedom and governance performance on the economic growth of the BRICS. Journal of Enterprise Information Management . https://doi.org/10.1108/JEIM-04-2021-0179

Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29 (4), 1450–1460. https://doi.org/10.1016/j.econmod.2012.02.014

Dybvig, P. H. (1983). An explicit bound on individual assets’ deviations from APT pricing in a finite economy. Journal of Financial Economics, 12 (4), 483–496.

Emara, N., & Jhonsa, E. (2014). Governance and economic growth: interpretations for MENA Countries. Governance, 9, 1–2014. Available at SSRN:  https://ssrn.com/abstract=3810934

Fakudze, S. O., Tsegaye, A., & Sibanda, K. (2022). The relationship between financial development and economic growth in Eswatini (formerly Swaziland). African Journal of Economic and Management Studies, 13 (1), 15–28.

Feng, Y. (1997). Democracy, political stability and economic growth. British Journal of Political Science, 391–418. https://doi.org/10.1017/S0007123497000197

Gopinath, C. (2018). Globalization: A Multi-dimensional System. Edward Elgar Publishing.

Guisan, M. C. (2009). Government effectiveness, education, economic development and well-being: Analysis of European countries in comparison with the United States and Canada, 2000–2007. Applied Econometrics and International Development, 9 (1), 39–55.

Han, X., Khan, H. A., & Zhuang, J. (2014). Do governance indicators explain development performance? A cross-country analysis. A Cross-Country Analysis (November 2014). Asian Development Bank Economics Working Paper Series(417). Available at SSRN: https://ssrn.com/abstract=2558894 or https://doi.org/10.2139/ssrn.2558894

Hasan, M. A. (2019). Does globalization accelerate economic growth? South Asian experience using panel data. Journal of Economic Structures, 8 (1), 1–13. https://doi.org/10.1186/s40008-019-0159-x

Husain, I. (2000). Impact of globalization on poverty in Pakistan. Paper read by.

Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7

Jalil, A., & Ma, Y. (2008). Financial development and economic growth: Time series evidence from Pakistan and China. Journal of Economic Cooperation, 29 (2), 29–68.

Jreisat, J. E. (Ed.). (2002). Governance and developing countries (Vol. 82). Brill.

Jung, S. M. (2017). Financial development and economic growth: Evidence from South Korea between 1961 and 2013.  International Journal of Management, Economics and Social Sciences (IJMESS) ,  6 (2), 89–106. http://hdl.handle.net/10419/168439

Kadhim, A. K. (2013). Governance in the Middle East and North Africa: A handbook . Routledge.

Book   Google Scholar  

Kao, C., & Chiang, M. -H. (2001), "On the estimation and inference of a cointegrated regression in panel data", Baltagi, B.H., Fomby, T.B. and Carter Hill, R. (Ed.) Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics, Vol. 15), Emerald Group Publishing Limited, Bingley, pp. 179–222. https://doi.org/10.1016/S0731-9053(00)15007-8

Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics, 90 (1), 1–44. https://doi.org/10.1016/S0304-4076(98)00023-2

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). Response to ‘What do the worldwide governance indicators measure?’ The European Journal of Development Research, 22 (1), 55–58.

Kaypak, Ş. (2011). Küreselleşme sürecinde sürdürülebilir bir kalkınma için sürdürülebilir bir çevre. Karamanoğlu Mehmetbey Üniversitesi Sosyal Ve Ekonomik Araştırmalar Dergisi, 2011 (1), 19–33.

Kazar, A., & Kazar, G. (2016). Globalization, financial development and economic growth. International Journal of Economics and Financial Issues, 6 (2), 578–587.

Khoshnevis Yazdi, S., & Shakouri, B. (2017). The globalization, financial development, renewable energy, and economic growth. Energy Sources, Part b: Economics, Planning, and Policy, 12 (8), 707–714. https://doi.org/10.1080/15567249.2017.1292329

King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. 108 (3), 717–737. https://doi.org/10.2307/2118406

Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A Cross-Country Investigation., 112 (4), 1251–1288. https://doi.org/10.1162/003355300555475

Le, T. H., Kim, J., & Lee, M. (2016). Institutional quality, trade openness, and financial sector development in Asia: An empirical investigation. Emerging Markets Finance and Trade, 52 (5), 1047–1059.

Lee, E., & Vivarelli, M. (2006). The social impact of globalization in the developing countries. International Labour Review, 145 (3), 167.

Lenka, S. K. (2015). Does Financial Development Influence Economic Growth in India? Theoretical & Applied Economics, 22 (4), 159–170.

Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108 (1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7

Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35 (2), 688–726.

Majeed, M. T., & Malik, A. (2016). E-government, financial development and economic growth. Pakistan Journal of Applied Economics, 26 (2), 107–128.

Manasseh, C. O., Abada, F. C., Okiche, E. L., Okanya, O., Nwakoby, I. C., Offu, P., & Nwonye, N. G. (2022). External debt and economic growth in Sub-Saharan Africa: Does governance matter? PLoS ONE, 17 (3), e0264082. https://doi.org/10.1371/journal.pone.0264082

Mankiw, G. N. (1995). The growth of nations. Brooking Papers on Economic Activity, 26 (1), 275–326. https://doi.org/10.2307/2534576

Moghaddam, A. A. (2012). Globalization and economic growth: A case study in a few developing countries (1980–2010). Research in World Economy, 3 (1), 54–60.

Mutascu, M., & Fleischer, A.-M. (2011). Economic growth and globalization in Romania. World Applied Sciences Journal, 12 (10), 1691–1697.

Nguyen, V. C. T., & Le, H. Q. (2021). Globalization And Economic Growth: An Empirical Evidence From Vietnam. Journal Of Organizational Behavior Research, 6 (1), 173–188. https://doi.org/10.51847/1PIOmlpSNh

North, D. C., & Thomas, R. P. (1973). The rise of the western world: A new economic history. Cambridge University Press.

North, D. C. (1990). Institutions, Institutional Change and Economic Performance . Cambridge.

Pedroni, P. (1996). Fully modified OLS for heterogeneous cointegrated panels and the case of purchasing power parity. Manuscript, Department of Economics, Indiana University , 5 , 1–45.

Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61 (S1), 653–670.

Pedroni, P. (2001). Fully modified OLS for heterogeneous cointegrated panels, Baltagi, B.H., Fomby, T.B. and Carter Hill, R. (Ed.) Nonstationary Panels, Panel Cointegration, and Dynamic Panels (Advances in Econometrics, Vol. 15), Emerald Group Publishing Limited, Bingley, pp. 93–130. https://doi.org/10.1016/S0731-9053(00)15004-2

Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20 (3), 597–625. https://doi.org/10.1017/S0266466604203073

Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22 (2), 265–312. https://doi.org/10.1002/jae.951

Pesaran, M. H. (2015). Testing weak cross-sectional dependence in large panels. Econometric Reviews, 34 (6–10), 1089–1117. https://doi.org/10.1080/07474938.2014.956623

Phillips, P. C., & Hansen, B. E. (1990). Statistical inference in instrumental variables regression with I (1) processes. The Review of Economic Studies, 57 (1), 99–125. https://doi.org/10.2307/2297545

Polasek, W., & Sellner, R. (2011). Does globalization affect regional growth? Evidence for NUTS-2 regions in EU-27 (No. 266). Reihe Ökonomie/Economics Series. http://hdl.handle.net/10419/68501

Potrafke, N. (2015). The evidence on globalisation. The World Economy, 38 (3), 509–552. https://doi.org/10.1111/twec.12174

Rahman, M. (2015). Impacts of globalization on economic growth-evidence from selected South Asian countries. Journal of Management Sciences, 2 (1), 185–204.

Rashti, N. A., Araghi, E. S., & Shayeste, M. (2014). Relationship between financial development and economic growth, evidence from financial crisis. Asian Economic and Financial Review, 4 (7), 930–940.

Rodrik, D., & Subramanian, A. (2003). The primacy of institutions. Finance and Development, 40 (2), 31–34.

Saint-Paul, G. (1992). Technological choice, financial markets and economic development. European Economic Review, 36 (4), 763–781.

Shah, S. H. A., & Shah, A. (2011). The association between financial development and economic development: A review. African Journal of Business Management, 5 (35), 13428–13434.

Shaw, E. S. (1973). Financial deepening in economic development. https://agris.fao.org/agris-search/search.do?recordID=XF2015011329

Sibindi, A. B. (2014). Remittances, financial development and economic growth: Empirical evidence from Lesotho. Journal of Governance and Regulation, 3 (4), 116–124.

Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 56 (1), 65–94.

Stiglitz, J. (2002). Development policies in a world of globalization. In New International Trends for Economic Development Seminar. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.202.4848&rep=rep1&type=pdf

Uddin, I., & Rahman, K. U. (2022). Impact of corruption, unemployment and inflation on economic growth evidence from developing countries. Quality & Quantity, 1–21.

Uddin, I., Khan, M. A., Tariq, M., Khan, F., & Malik, Z. K. (2023a). Revisiting the determinants of life expectancy in Asia—exploring the role of institutional quality, financial development, and environmental degradation. Environment, Development and Sustainability, 1–21.

Uddin, I., Ullah, A., Saqib, N., Kousar, R., & Usman, M. (2023c). Heterogeneous role of energy utilization, financial development, and economic development in ecological footprint: How far away are developing economies from developed ones. Environmental Science and Pollution Research, 30 (20), 58378–58398.

Uddin, I., Usman, M., Saqib, N., & Makhdum, M. S. A. (2023b). The impact of geopolitical risk, governance, technological innovations, energy use, and foreign direct investment on CO2 emissions in the BRICS region. Environmental Science and Pollution Research, 1–16.

UNDP. (1997). “Governance for sustainable human development – a UNDP policy document”, United Nations Development Programme, available at: http://mirror.undp.org/magnet/policy/ (Accessed 1 June 2009).

Uzelac, O., Davidovic, M., & Mijatovic, M. D. (2020). Legal framework, political environment and economic freedom in central and Eastern Europe: Do they matter for economic growth? Post-Communist Economies, 32 (6), 697–725. https://doi.org/10.1080/14631377.2020.1722583

Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69 (6), 709–748. https://doi.org/10.1111/j.1468-0084.2007.00477.x

World Bank. (1994). Governance and development. Retrieved from: https://elibrary.worldbank.org/

World Development Indicators (WDI). (2021). World Bank. http://databank.worldbank.org

World Governance Indicators (WGI). (2021). https://databank.worldbank.org/source/worldwide-governance-indicators

Xu, X., Abbas, H. S. M., Sun, C., Gillani, S., Ullah, A., & Raza, M. A. A. (2021). Impact of globalization and governance determinants on economic growth: An empirical analysis of Asian economies. Growth and Change, 52 (2), 1137–1154.

Ying, Y. -H., Chang, K., & Lee, C. -H. (2014). The impact of globalization on economic growth. Romanian Journal of Economic Forecasting, 17 (2), 25–34.

Yurttançikmaz, Z., Kabadayi, B., & Emsen, Ö. (2014). Turkey analysis on economic growth and competitiveness. Istanbul University Econometrics and Statistics e-Journal, 21 , 21–46.

Zhuo, Z., Muhammad, B., & Khan, S. (2021). Underlying the Relationship Between Governance and Economic Growth in Developed Countries. Journal of the Knowledge Economy, 12 (3), 1314–1330.

Download references

Author information

Authors and affiliations.

Department of Economics, Faculty of Business & Economics, Abdul Wali Khan University Mardan, Khyber Pakhtunkhwa, Pakistan

Ijaz Uddin & Muhammad Azam Khan

You can also search for this author in PubMed   Google Scholar

Corresponding author

Correspondence to Ijaz Uddin .

Ethics declarations

Conflict of interest statement.

The authors declare that they have no conflict of interest.

Additional information

Publisher's note.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Uddin, I., Azam Khan, M. Global Evidence on the Impact of Globalization, Governance, and Financial Development on Economic Growth. J Knowl Econ (2023). https://doi.org/10.1007/s13132-023-01656-4

Download citation

Received : 08 June 2022

Accepted : 19 November 2023

Published : 22 December 2023

DOI : https://doi.org/10.1007/s13132-023-01656-4

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Globalization
• Financial development
• Economic growth
• Find a journal
• Publish with us
• Track your research

Social and Economic Aspects of Globalization Research Paper

View sample social and economic aspects of globalization research paper. Browse research paper examples for more inspiration. If you need a thorough research paper written according to all the academic standards, you can always turn to our experienced writers for help. This is how your paper can get an A! Feel free to contact our writing service for professional assistance. We offer high-quality assignments for reasonable rates.

Since the 1970s and 1980s, the increasing intensity of international economic exchange, the rising prominence and influence of international organizations, the diffusion of cultural products across national boundaries, the spanning of social ties across international borders, and global environmental problems have all placed globalization prominently on the agenda of social science. The definition of globalization remains contested, but globalization can be conceptualized as a multidimensional process of international network formation. (Globalization could also be understood as an ideology, but this would more accurately be termed globalism .) The network metaphor clarifies the concept of globalization by highlighting both the nodes (e.g., people, organizations, and states) and the relations (e.g., trade, investment, organization membership, consumption, and migration) that are central to the globalization process. Thinking about globalization as multidimensional network formation is also a useful heuristic for understanding the established facts and unresolved debates surrounding the phenomenon. Moreover, it helps differentiate the multiple levels of analysis inherent in the process: globalization involves local, regional, national, international, and world levels of social life.

Academic Writing, Editing, Proofreading, And Problem Solving Services

Get 10% off with 24start discount code.

Below, this entry employs the network heuristic to discuss the central issues in the social science of globalization. The discussion begins by exploring relatively settled terrain: the multiple dimensions of globalization. From there, the entry moves to rockier ground: the questions of whether globalization is really new, how extensive it is, and precisely what effects it has.

Five Dimensions of Globalization

Cross-national connections are created in the economic, political, cultural, social, and environmental domains. Although these dimensions necessarily overlap, it is analytically useful to distinguish them. Economic globalization results when corporations go multinational, either by selling their products in other countries, buying corporations located in foreign countries, or opening branch offices or subsidiaries outside their home country. Multinational corporate expansion, and the consumption of foreign-sourced goods and services, aggregate into exports, imports, and investment relations among national economies. Political globalization, or the formation of international connections among elected officials, bureaucrats, judges, social movement activists, and states, has also generated intense interest. Political globalization results in part through the formation of intergovernmental organizations (IGOs) like the United Nations and the World Trade Organization, and international nongovernmental organizations (INGOs) like the International Committee of the Red Cross. For instance, Anne-Marie Slaughter (2004) shows how political officials, especially regulators and judges, weave a web of global governance and “world order” through international ties formed by these organizations.

In the cultural field, the major world religions, media conglomerates, multinational corporations, and international tourism transmit and translate meaning (embedded in faith traditions, ideas, products, and practices) and symbols across international boundaries. The development of the international communication infrastructure (radio, satellites, intercontinental telecommunication cables) and the rapid expansion of communication technologies (Internet, cell phones, television) foster this process. Closely related is social globalization, or transnational connections formed by mobile individuals as they create social relationships. For instance, the density of international ties across countries grows as migrants maintain connections to their origin countries (e.g., through remitting money back home) while building new relationships in their destination countries (e.g., through work, community, and family).

Many identify the environment as a fifth dimension of globalization. If nations are the nodes in international networks, then environmental problems create connections by crossing borders: global warming, ozone depletion, and acid rain have all been defined by social movement activists and scientists as international problems that require international solutions. Indeed, environmental problems illustrate how the various dimensions of globalization sometimes reinforce one another: social movement activists bind together through international social movement organizations (social globalization) to spread awareness of environmental problems (cultural globalization) caused in part by multinational corporations (economic globalization), and urge the adoption of international agreements like the 1997 Kyoto Protocol on greenhouse gas emissions (political globalization).

When and Where is Globalization?

While the example of the Kyoto Protocol illustrates how the dimensions of globalization can cohere, intense international debate over the protocol raises questions about the pace and periodization of globalization, and, more fundamentally, about how “global” globalization is. Indeed, debate over the timing and extent of globalization animates much research. For instance, world-systems theorists such as Immanuel Wallerstein and Christopher Chase-Dunn trace the millennia-long evolution of international economic and political systems, and world-society theorists such as John Meyer and John Boli view social and cultural globalization through a long historical lens that looks back over a century. Social scientists have not reached consensus on when globalization in its various forms began, but there is an emerging consensus that the world has experienced a renewed and possibly distinct economic globalization since the mid-1970s (i.e., after the oil crises and the collapse of the Bretton Woods system of fixed exchange rates in 1973). Only during this period did the level of international trade surpass its previous peak in the early twentieth century. Thus, economic globalization may follow waves, with crests of integration followed by troughs of separation.

In the political dimension, there is also evidence that globalization substantially intensified in the latter half of the twentieth century. With the establishment of the United Nations and related IGOs (including the International Monetary Fund, World Bank Group, International Labour Organization, and World Health Organization), a global governance framework emerged. It has fostered the creation of thousands of intergovernmental and nongovernmental organizations that generate a network of international association (Boli and Thomas 1999). Key nodes in this network include regional organizations like the European Union (EU) that liberalize trade and create common policies among nations within negotiated geographical boundaries. The EU has progressed furthest toward the creation of a regional market and government, as it has allowed the free movement of people across borders, eliminated barriers to trade, created a supranational court, and established supranational policies. The EU, established as the European Economic Community in 1957, may have inspired regional integration efforts in other parts of the world, including Southeast Asia—the Association of Southeast Asian Nations (ASEAN, 1967); South America—Mercado Común del Sur (Southern Common Market or Mercosur, 1991); North America—the North American Free Trade Agreement (NAFTA, 1994); Central America—the Central American Common Market (CACM, 1960); and Africa—the Organization of African Unity (OAU, 1963). These organizations may transform world politics by changing how states interact and by generating new layers of policy and politics.

The accelerating economic liberalization and polity construction within geographical regions fuels the debate over where globalization actually happens (indeed, a large literature addresses whether regional integration creates “stepping-stones” or “stumbling blocks” to a fully integrated global system). Here again, the network heuristic helps. Some images of globalization depict a world where national nodes worldwide are increasingly interconnected without regard to place, while others allow for a more fragmented and uneven network where some nodes are linked much more densely than others. These contrasting images manifest in research that has shown, for instance, that Western Europe is much more densely intertwined in both the economic and political dimensions than nations in other world regions.

What Does Globalization Do?

Setting aside controversies of period and place, social scientists blame or credit globalization for a panoply of social ills and goods, from economic inequality to economic growth, from political domination to democratization, from the decline of national sovereignty to the renaissance of the state, from social engagement to xenophobia, and from cultural homogenization to ethnic conflict. Meanwhile, others see a feeble globalization. Here, this entry reviews some of the key arguments for what globalization does.

Globalization, advanced partly by IGOs like the World Trade Organization and the International Monetary Fund that compel economic liberalization, has been the subject of vigorous debate about growing income gaps between rich and poor. The argument is that, in the name of international competitiveness, government revenue and expenditures are cut, and industries are deregulated and privatized. Globalization is also blamed for lowering the wages of less-skilled workers by shifting manufacturing jobs to lower-wage countries, and by enlarging the pool of low-wage labor through immigration. In turn, in low-wage countries of the “Global South,” globalization is blamed for proliferating sweatshops owned by multinational corporations, producing an underclass of nonunionized labor, and generating an exploitive transnational capitalist and entrepreneurial class. Moving from individuals to countries, globalization arguably benefits rich countries at the expense of poor countries, by further concentrating wealth in rich countries as profits are repatriated from the Global South to the Global North. On the other hand, much of the literature has been skeptical of the criticisms that have been leveled at globalization. Just to take one example of the potentially salutary effects of globalization, it has been argued that globalization actually reduces disparities among rich and poor countries in their overall levels of economic development, by spreading industrialization to poor countries.

Social scientists also disagree intensely over whether globalization brings about political convergence among states. There is evidence that states adopt increasingly similar policies in areas such as education, welfare, the environment, human rights, and population as they interact more with international organizations. International organizations, it is argued, create and diffuse policy models (or “scripts”) to states, and states adopt these models, in part, to appear as legitimate members of a world society. This process may reflect the spread of modern, Western culture (e.g., individualism, universalism, rationalism, science, and progress) around the globe. These claims remain controversial, and some argue that international organizations serve national interests and as such have strictly limited independent influence. It is a major challenge to contemporary social science to bring some resolution to the varied, contradictory, and multivalent picture of globalization that has emerged.

Bibliography:

• Alderson, Arthur S., and Francois Nielsen. 2002. Globalization and the Great U-Turn: Income Inequality Trends in 16 OECD Countries. American Journal of Sociology 107: 1244–1299.
• Boli, John, and George M. Thomas, eds. 1999. Constructing World Culture: International Nongovernmental Organizations Since 1875 . Stanford, CA: Stanford University Press.
• Boswell, Terry, and Christopher Chase-Dunn. 1999. The Spiral of Capitalism and Socialism: Toward Global Democracy . Boulder, CO: Lynne Rienner.
• Brady, David, Jason Beckfield, and Martin Seeleib-Kaiser. 2005. Economic Globalization and the Welfare State in Affluent Democracies, 1975–2001. American Sociological Review 70: 921–948.
• Chase-Dunn, Christopher, Yukio Kawano, and Benjamin D. Brewer. 2000. Trade Globalization Since 1795: Waves of Integration in the World System. American Sociological Review 65: 77–95.
• Firebaugh, Glenn. 2003. The New Geography of Global Income Inequality . Cambridge, MA: Harvard University Press.
• Guillén, Mauro F. 2001. Is Globalization Civilizing, Destructive, or Feeble? A Critique of Five Key Debates in the Social Science Literature. Annual Review of Sociology 27: 235–260.
• Held, David, Anthony McGrew, David Goldblatt, and Jonathan Perraton. 1999. Global Transformations: Politics, Economics, and Culture . Stanford, CA: Stanford University Press.
• Meyer, John W., John Boli, George Thomas, and Francisco Ramirez. 1997. World Society and the Nation-State. American Journal of Sociology 103: 144–181.
• Slaughter, Anne-Marie. 2004. A New World Order . Princeton, NJ: Princeton University Press.

ORDER HIGH QUALITY CUSTOM PAPER