Driving Factors of Globalization: An Empirical Analysis of the Developed and Developing Countries

Abstract

There are several economic, political, social and technological factors that have contributed to globalization in recent decades. The literature has yet to come up with a comprehensive analytical framework. Present study develops a formal framework, which highlights the sources of globalization. Furthermore, the study also provides an empirical test for driving factors of globalization in developed and developing countries. Results of dynamic ordinary least square show human capital, capital, labor, transportation and communication and financial index as the important drivers of globalization in both developed countries and full sample. However, capital, labor and financial index appear to determine the process of globalization in developing countries. For robustness of the results, Generalized Method of Moments (GMM) is also applied; the results in full panel and developing countries are similar. However, efficiency index appears to be significant. In the panel of developed countries human capital, transportation and communication and financial index are significant.