Wednesday, 21 March 2012

Ikea-based globalization measures

This week's inbox brought a new "Index of Globalization" measure. New Zealand fared a bit worse than I expected - 78.3 points, well outside of the top 15, so I had a peek at the sub-indices.

Thirty-seven percent of the aggregate figure comes from "Social Globalization"; thirty-one percent of that figure is a measure of "cultural proximity" [11.5% of the overall score], forty-five percent of which is "Number of Ikea (per capita)". So that's a five percentage point reduction in New Zealand's overall score because we have no Ikea.

The highest "Cultural Proximity" score was Singapore, 2001: 97.4. New Zealand scored a 50.2; if we went from zero Ikea per capita to the top of the scale, we'd then have scored a 95.2. So it's not particularly puzzling that NZ scored very very badly on this measure.

You could say it's pretty silly to base 5% of a measure of overall globalization on the number of Ikeas in a country. But not having Ikeas does signal something relevant either about local demand or about how local planning authorities treat international firms, the latter likely as consequence of domestic competitors lodging anti-competitive complaints through the RMA about effects on traffic.

We also score relatively poorly in Political Globalization, undoubtedly affected by the smallish number of countries that reckon it worthwhile keeping embassies here and by that we participate in relatively few UN Security Council Missions. I'm less than convinced we ought to worry much about either of these.

But I was surprised that New Zealand scored poorly on measures of trade restrictions. If phytosanitary restrictions count as "hidden import barriers", then that could perhaps account for it. But our mean tariff rate is very low, taxes on international trade are a trivial part of current revenue unless they count excise-equivalent duty on imported alcohol and tobacco collected by Customs NZ as being tax on international trade, and there aren't really any capital account restrictions.

If I hear back from KOF on why they scored NZ poorly on trade restrictions, I'll update.


  1. Did you look at the impact of just one Ikea on the ranking? If it is very sensitive, then we've got a bulky good/small population issue, too.
    I'm interested to hear what you find about trade restrictions. I noticed in another ranking (on environment) that isolated island ecosystems (NZ, Madagascar) were disadvantaged by the way the ranking was calculated. If SPS measures are used, then the same thing could be happening.

    1. It's Ikea per population, so backing it out wouldn't be easy. We know the total potential category contribution, and we know that NZ has zero, so we can easily say what going from none to max would do for us. But they don't give enough background detail to back that stuff out. Unless I wanted to spend a day constructing an "Ikea per population" measure and try to use it to figure out how they ran that scoring.

      I emailed them Monday, let the post sit on Tuesday, hit publish button this morning. Not sure if I'll hear back.