How Far has Globalization Gone? A Tale of Two Regions

ABSTRACT We study the evolution of trade globalization in Latin America and Asia over the period 1995–2018 and quantify its economic impact. Using structural a gravity estimation, we estimate a proxy of trade globalization that captures the ease of trading internationally with respect to trading domestically. Results indicate similar trade globalization patterns between the two regions, but a great degree of heterogeneity within them. Trade globalization has been particularly strong in agriculture, mining, and manufacturing, but has lagged in services. Next, we quantify the economic implications of the estimated globalization trends. Simulations of a multi‐country four‐sector trade model point to heterogeneous long‐term impacts of globalization on GDP—some countries exhibiting substantial gains and others experiencing large losses—, with no single sector playing a preponderant role.