DP16436 Globalization, Freedoms and Economic Convergence: An empirical exploration of a trivariate relationship using a large panel

Author(s): Jorge Braga de Macedo, Joaquim Oliveira Martins, João Tovar Jalles
Publication Date: August 2021
Date Revised: August 2021
Keyword(s): convergence, democracy, Development, freedoms, Globalization, panel data, three-stage least squares
JEL(s): F02, F11, F13
Programme Areas: International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16436

Using a large panel for 95 countries and the 1972-2014 period, this paper analyses the interactions among globalization, political & civil rights and economic convergence, through a simultaneous estimation technique. We use a multi-dimensional, de facto, and continuous measures of Freedoms and Globalization. We find a two-way positive relationship between civil liberties & political rights and economic, political and social Globalization, as well as significant two-way relationships with the economic convergence (using as a proxy the ratio of GDP per capita to the US). In this way, we extend the test for the two-way relationship between Democracy and Globalization put forward by Eichengreen and Leblang (2008). Overall, we also find a virtuous cycle between Globalization, Freedoms and Economic convergence, except for non-OECD countries at early intermediate stages of development. This positive systemic effect can be put into question by the recent negative shocks on Globalization and Freedoms related to the Covid-19 pandemic.