Disentangling the effects of globalization on growth: Evidence from Ethiopia using an ARDL approach

Globalization is a complex phenomenon with far-reaching and multidimensional influences on national growth trajectories. Previous studies examining these effects have often relied on overly simplistic measures that mask heterogeneity across contexts. This paper aims to overcome such limitations by disentangling the impacts of different globalization dimensions on Ethiopia’s economic development over 1981–2021 using an autoregressive distributed lag (ARDL) approach in order to assess the long-term and short-term effects of Ethiopia’s economic growth rates and a comprehensive globalization index encompassing the economic, social, and political dimensions of globalization. Long-run and short-run relationships are estimated via ARDL to analyze these relationships in the context of factors like investment, workforce, trade, and capital stock, while the robustness of findings is ensured through dynamic ordinary least squares, fully modified ordinary least squares, and canonical cointegrating regression techniques. Key results indicate that overall and economic globalization exhibit negative long-term associations with growth when analyzing these relationships taking into account other factors, suggesting a need for a cautious, sequenced approach to integration to optimize benefits as local capacities develop over time. However, political globalization carries positive long-run effects. Social globalization displays no clear linkage. Short-run impacts also differ by dimension. Gross capital formation, trade openness, and capital stock remain consistently growth-enhancing. The negative correlation in the labor force likely reflects structural challenges. Robustness analyses substantiate these conclusions, enhancing confidence. Findings imply a cautious, sequenced approach to integration may optimize potential benefits as local adaptive capacities develop over time. This investigation’s tailored nature provides contextually grounded empirical knowledge with broader policy applications. More refinement of country-level analyses remains warranted to fully uncover globalization’s complexity. Overall, incremental global ties alone proved insufficient for development acceleration. Findings carry relevance for managing integration strategies towards inclusive, sustainable development nationally and beyond.