Economic Globalization and Governance: the Role of Social Globalization
Abstract: Recent decades have experienced a marked acceleration in the process of globalization. This remarkable proliferation of the globalization phenomenon has been associated with significant consequences felt in economic, social and political well-being around the globe. This paper analyzes the role of economic globalization in improving different governance issues that are of particularly important in the context of developing nations. We contribute to this literature by exploring how does economic globalization comprising of different aspects of internationalization like trade openness, FDI inflows, and portfolio investments affect different dimensions of governance? Further, while a large part of globalization implies greater trade and FDI inflows, it also implies integration of culture, ideas and vision. In this context, we delve into the role of a different aspect of globalization where emergence of neo transnational capital played a pivotal role in changing different and varied social mindsets across the world into a more cosmopolitan one (social globalization). In particular we analyze if social globalization acts as a moderator in the relationship between economic globalization and governance. Our contributions in the paper are twofold. First our results show that economic globalization enhances most indicators of governance like rule of law, government effectiveness, reducing corruption, regulatory quality and voice and accountability. Second, our results importantly show that indeed social globalization acts as a moderator. The estimated marginal impacts show that countries with low levels of social globalization, fail to benefit from economic globalization. Yet, this impact is enhanced for countries with higher levels of social globalization.
