An Entropy-Based Inequality Risk Metric to Measure Economic Globalization

Is the economy really globalizing? Economic globalization is not only characterized by increased trade flows but also by increased interweavement of trade flows. To analyze the evolution of globalization in different macro-geographic regions a new inequality measure based on a paradigmatic interpretation of Boltzmann's entropy will be applied.Boltzmann's disorder of a thermodynamic system can be re-interpreted figuratively as risk of an economic system by creating an economy-genotypic risk inequality measure covering the spatial nature of globalization; the greater the disorder (i.e. equality) within the system, the lower the risk within the economic system. By substituting the pole of statistics variance with the inequality measure, we get a new measure of the risk level for the economic trade system.The paper analyzes the WTO trade figures between 2003 and 2009 with regard to the different evolution of globalization within the macro-geographic economic regions. The new economic interpretation of entropy allows not only to quantifying the globalization degree of an economic system, but with its genotypic nature, it also allows to give an explanation to the globalization phenomenon.