has been sustained throughout the new globalization landscape and up to the global financial crisis [IMF (2007), Adams (2008)]. Similarly, sustained increases in total investments and capital accumulation are partly a response for rising global demands, which should follow through the output growth channel, especially if larger weights are assigned to the production of high-tech and manufacturing goods. On average, global trade increases by .033 percent for every 1 percent increase in the stock of capital net of depreciation, ceteris paribus. The proportional change in global exports associated with total consumption is of similar magnitude.

However, the pertinence of efficiency variables is not as straightforward. Although indicators of good governance and real effective exchange rate are positively related to trade—a real exchange rate depreciation is associated with increases in exports—these variables are not significant, even at the 5 percent level. On the other hand the macroeconomic instability variable, which is significant at the 1 percent level, has a positive sign. However, the coefficient associated with this variable is fairly small, and probably reflects the fact that the decades of sustained output growth and exceptional boom in global trade were also accompanied by price stability [IMF (2006)].<sup>33</sup> However, there is a growing concern that rising fiscal deficits and expansionary monetary policies implemented in response to the global financial crisis may fuel inflationary pressures, especially in countries with greater resource intensity [IMF (2009)].

In spite of the relatively low level of significance of these efficiency variables and the relaxation of some of the key hypothesis underlying the theoretical model, the globalizers’ actual distribution of exports of goods and services is well captured by predicted values derived from the empirical model. Figure 3 below compares actual (solid thick line) and predicted (solid thin line) distribution of exports of goods and services for these countries. Except at the tail end of the distributions, the absolute deviation between actual and predicted values is almost equal to zero, and the deviation towards the end of the distribution is relatively small.

Turning to the set of globalizees, a variation of the empirical model is applied to data in SubSaharan African countries. Panel estimation results are provided in Table 2 in the Annex. Among the technology level variables, the number of researchers and manufacturing exports are significant determinants of globalization in the region. The resulting _p-values_ are close to zero for these variables suggesting that they are both significant at the 1 percent level. This result is consistent with existing empirical studies and analysis of OECD countries’ data. In fact, according to a recent study, globalization whether defined in terms of technology diffusion or foreign direct investments, has disproportionately benefited countries with better scientific and technological infrastructures [IMF (2007)].

Moreover, the potential contribution of these variables to total exports for countries in the region is higher in comparisons to that of OECD countries. In particular, exports of goods and services increased by 1.7 percent for every 1 percent increase in the total number of researchers, ceteris paribus. The much higher marginal contribution of technology factors to globalization in these countries probably reflects the initial conditions characterized by poor scientific and technological infrastructures. It also highlights the higher role that science and technology could play in furthering the integration of Africa into the new globalization landscape, increasingly driven by knowledge [Rebelo (1998), Andreosso-O’Callaghan (2002)].

> 33 Interestingly, globalization might have played a positive role in the exceptionally low rates of inflation in the new globalization landscape. In particular, the relative stability in the flows of private capital throughout the era was a positive factor; at the same time, the low cost of manufactured goods prevented international transmission of inflationary pressures.

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