Distance measures between free trade and autarky for the world economy

We develop a methodology to determine numerically how globalized the world economy is. We present a global general equilibrium model capturing major OECD economies and a residual rest of world for which alternative metrics of distance between observed, free trade and autarky equilibria can be developed. We use data for 2000 and report a number of distance measures between the 2000 observed trade restricted equilibrium and both free trade and autarky equilibria noting the absence of prior literature on metrics of distance between equilibria. The measures are used to determine the degree to which the world economy is globalized.

Research highlights► We develop a methodology to determine how globalized the world economy is motivated by globalization measures. ► We argue that such measures are more meaningful for a combined global economy. ► We present a global general equilibrium model capturing major OECD economies and a residual ROW.