Measuring Globalization of International Trade: Theory and Evidence

SummaryMeasuring globalization requires a Standard of Perfect International Integration as a benchmark that a single world space would reach under conditions of geographic neutrality in international trade. We define this standard and present indicators for openness, connectedness and integration, for each specific economy, and for the world economy. We apply our indicators to data on trade flows for 59 countries for the 1967–2004 period. Results show that trade integration is higher than what traditional openness indicators suggest. Several economies find high levels of integration, but the low degree of openness in some large economies jeopardizes the progress of globalization.