The Europe 2020 Index

max^GGE = 193.90 (Cyprus 2008), min^RNEW = 0.10 (Malta 2006), max^POV = 61.30 (Bulgaria 2006).

It defines globalization as the process of creating networks of connections among actors at multi-continental distances, mediated through a variety of flows including people, information and ideas, capital and goods. Globalization is conceptualized as a process that erodes national boundaries, integrates national economies, cultures, technologies and governance and produces complex relations of mutual interdependence. More specifically, the three dimensions of the KOF index are defined as: economic globalization, characterized as long distance flows of goods, capital and services as well as information and perceptions that accompany market exchanges; political globalization, characterized by a diffusion of government policies; and social globalization, expressed as the spread of ideas, information, images and people. It uses a linear aggregation method.

The ten sub-indices are: Starting a business (Procedures, time, cost and minimum capital to open a new business); Dealing with construction permits (Procedures, time and cost to build a warehouse); Employing workers (Difficulty of hiring index, rigidity of hours of index, difficulty of redundancy index, rigidity of employment index, redundancy costs); Registering property (Procedures, time and cost to register commercial real estate); Getting credit (Strength of legal rights index, depth of credit information index); Protecting investors (Indices on the extent of disclosure, extent of director liability and ease of shareholder suits); Paying taxes (Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit); Trading across borders (Number of documents, cost and time necessary to export and import); Enforcing contracts (Procedures, time and cost to enforce a debt contract); Closing a business (Index of recovery rate which is a function of time, cost and other factors such as lending rate and the likelihood of the company continuing to operate).

The index is built on 90 variables, of which two-thirds come from the Executive Opinion Survey, and one-third comes from publicly available sources such as the United Nations. The variables are organized into nine/twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness. The GCI separates countries into three specific stages: factor-driven, efficiency-driven, and innovation-driven, each implying a growing degree of complexity in the operation of the economy. The GCI applies a linear aggregation method.

This is valid for all the available years, from 1995 to 2009, compared to the values of 2006, 2007 and 2008 for the Europe 2020 Index. Pearson’s and Spearman’s coefficients values are comprised between +0.2 and −0.2.

The indicators are a compilation of the perceptions of different groups of respondents, collected in large number of surveys and cross-country assessments of governance. Some of these instruments capture the views of firms, individuals, and public officials in the countries being assessed. Others reflect the views of NGOs and aid donors with considerable experience in the countries being assessed, while others are based on the assessments of commercial risk-rating agencies.