A New Index of Globalization: Measuring Impacts of Integration on Economic Growth and Income Inequality

Abstract

This study introduces a new composite index of globalization building on the separate contributions of intraregional and extra regional integration. Using the new index, the study also evaluates the possible effects of globalization on economic growth and income inequality. The results show that although globalization promotes economic growth, it may worsen income inequality. The positive effect of globalization on economic growth is strongest among high-income economies. The analysis also finds extra regional integration to be mainly responsible for the rise in income inequality that has accompanied globalization.