The importance of, and pitfalls in, measuring globalization

In recent years, globalization has been the subject of an increasingly intense public dialog, as international trade and investment have grown and as patterns of trade and investment have evolved and assumed new forms. Economic statisticians are charged with compiling information on globalization that is relevant, timely, and accurate. This paper discusses issues that may be encountered in carrying out this mandate with respect to two major ways in which globalization manifests itself in real terms - cross-border trade in goods and services and foreign direct investment and the resulting international activities of multinational companies. The paper assesses the importance of measurement and examines some of the pitfalls that may be encountered in constructing indicators of globalization and in using those indicators to quantify and describe the phenomenon and gauge its economic impact. The discussion is informed by the experiences of the United States in developing this information.