Spillover effects of globalization using alternative spatial approaches

Abstract

<p>Globalization's ramifications extend beyond borders, impacting local and global economies through intricate spatial connections, ultimately influencing economic growth trajectories. This study examines globalization's spillover impact on economic growth across 158 countries from 1990 to 2019, integrating geographical and non-geographical factors through spatial econometric techniques. The Spatial Durbin Model (SDM) based on CPSLHT (cultural, political, social, linguistic, and historical group memberships and international trade agreements) emerged as the best model compared to other spatial models. It finds expected direct positive associations between factors like initial GDP per capita, capital formation, labour force participation, economic globalization, health spending, urbanization, life insurance, poverty reduction, labour productivity, and rule of law with economic growth. However, the spillover effect of neighbouring countries on economic growth is significant and negative. The Fixed Effects SDM also identifies indirect influences on economic growth, including health spending, the age dependency ratio, and the population growth rates. Global negative effects are prevalent, especially in regions with low GDP per capita, reduced health spending, and a high age dependency ratio. Countries can enhance globalization's benefits and mitigate drawbacks by investing in healthcare, boosting labour force participation, reducing age dependency, promoting urban development, and upholding the rule of law.</p>