Globalization and Economic Growth: A Political Economy Analysis for OECD Countries

Abstract

Globalization is commonly defined as a strict economic path by most previous works, but it is really a fuzzy concept with unrestrained dimensions. While the ideological location of an incumbent political party is a powerful predictor of its policy position, the role of a political party in the globalization-growth nexus has never been fully empirically investigated. By applying Pedroni's panel cointegration technique instead of a time-series or traditional panel data approach, this paper aims to empirically re-examine the co-movement and the causal relationship among economic growth, the overall globalization index, and its three main dimensions—economic, social, as well as political integrations—by using panel data for 23 Organization for Economic Cooperation and Development (OECD) countries for 1970 to 2006. Certainly, the political party variable is taken into account as the advanced test is promoted, and we finally discover that all variables move together in the long run. Based on the results of the panel causality test, though the evidence of short-run causality is very weak, it does show long-run unidirectional causality running from the overall index of globalization, economic globalization, and social globalization to growth. Finally, the critical role of the political party is deeply discussed in relation with our results.