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National symbols, globalization, and the well-being of nations
Voxi Heinrich Amavilah
Abstract: I estimate the effects of national symbols and globalization on the well-being of 88 countries. I
find that conventional determinants of production affect national well-being, measured as human
development index (HDI). The effects on HDI of national symbols like national flag colors are unstable,
while those of globalization are strong, with social globalization having the strongest effect. The results
suggest that national symbols are important to national well-being, but nations gain more from global
interactions with other nations than from national pride. Even as there is a need for further research to
improve upon the results associated with the effects of national symbols, the policy implications of the
findings clearly recommend increased investment in material conditions of nations and globalization. JEL
Code: O43, O57, H77, F43, O11, D31, Z00
Keywords: National identity, national colors, globalization, well-being of nations, human development
index (HDI), national flag colors
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A decent state of well-being, however measured, is the ultimate objective of every
economic agent, nations included. While economic anthropologists and others are
convinced that the 'problems of production and distribution, of value and economic
motivation, of allocation of available means for the realization of desired ends, were
universals in human experience' (Herskovitz, 1964, p.7), performance economists
continue to ponder the deep causes of, and observed cross-country differences in, human
well-being. The continued pondering indicates incomplete knowledge and understanding
of the determinants of human well-being.
In this exploratory empirical paper I argue that, besides conventional factors and forces,
the well-being of nations depends on national symbols and global interactions. I represent
national symbols with national flags and national flag colors, and global interactions with
globalization. Then I utilize a simple production function approach to quantify the effects
of national symbols and globalization on human well-being in 2007. The assessment sheds
additional light on a worthwhile issue. Moreover, in the interactive world we live in,
national symbols and globalization seem policy incongruent. For instance, is the
preservation of national symbols consistent with global integration? If national symbols
and globalization both promote human well-being, what conclusions can policy infer from
such a result?
I find that the conventional factors and forces of capital and the growth of labor affect
national well-being positively and negatively, respectively. Increased globalization leads
to a higher HDI, but different types of globalization have different effects on HDI, with
the effect of social globalization being greater than the effect of political globalization,
which is in turn greater than the effect of economic globalization. National symbols have
mixed effects on HDI in terms of the estimate sign, magnitude, and statistical significance
(i.e., overall parameter efficiency). It generally appears that globalization and national
symbols represent competing forces - a maintained assertion for now. Tested is that
variations in HDI across broad geographic regions are approximately the same in terms of
magnitude and negative sign.
From the coefficients of conventional factors and forces I infer that GDP (PPP) per capita
is an essential determinant of national well-being. Non-economic factors like national
symbols affect national well-being; however, their effects are positive when considered in
isolation and negative in light of globalization, for example. Now whether nations seek to
strengthen their national independence or their global interdependence is a marginal
cost/benefit decision. In this analysis evidence favors globalization, especially social
globalization. This conclusion is not altered by regional variations, although the instability
of the estimated effects of national symbols indicates a need for further research on this
The remainder of the paper describes my journey, so to speak. In Section 2 below I outline
the scanty relevant literature. Section 3 focuses on the empirical analysis. First, it builds a
1A literature that extends the HDI applications to poverty, gender, and other
issues of (in)equality and redistribution is fast growing.
model. Second, it describes the data, and thirdly, implements the model. Section 4
presents preliminary findings and their implications, while the final section makes a
2. The scanty relevant literature
The literature on the human well-being of nations is vast, and the vastness makes
sense since well-being is ultimately the objective of every economic agent. As May
(2007) points out, the concept of utility in the microeconomic theory of consumer
behavior reflects the centrality of well-being in life. Quantitative measures of human
well-being (welfare) now attract considerable attention (Kahnemann, Diener, and
Schwarz, 2003, Bruni and Porta, 2007), but at the national and cross-national levels it
was not long ago when a breakthrough of sorts came by way of Anand and Sen’s
(1994) successful development of the first comprehensive index of human
development - the human development index. (HDI). The advantage of the HDI over
GDP per capita as a measure of well-being is that it is actually three-dimensional, and
potentially multidimensional.1 To-date major improvements have been made on the
first generation of HDI (Clark and McGillivray, 2007, Clarke and McGillivray, 2006,
Mishra and Nathan, 2008). Clearly, both the new and old literature indicate that
measured as happiness well-being is a function of economic and non-economic
factors. Key among economic factors is income which defines the consumer's
consumption possibilities. As a flow income depends on the stock of productive
resources and wealth. Building wealth and improving productive resources require
scare time and efforts for which leisure is an opportunity cost. Non-economic factors
include social, cultural, political, and psychological environments (see Hoselitz,
1952). Despite this acknowledgment, most literature still uses per capita income as a
proxy for human welfare.
In a related area, the nexus between economic growth and globalization draws mainly
from economic growth and trade theories. Hence, from Axel Dreher's (2003) finding
that globalization promotes economic growth, for example, many economists would
have no problem inferring that globalization is good for human well-being. Indur M.
Goklany (2002) observes positive the effects of globalization on human well-being,
and concludes that ‘... in terms of the truly critical measures of well-being - hunger,
infant mortality, life expectancy, child labor - the countries of the world are much
closer to being equal now than they were a few decades ago’ (p. 15). Yet continued
debate indicates globalization is not omni-good. For example, Ming-Chang Tsai
(2006) uses a random effect model to estimate the impacts of globalization on human
well-being, and finds a direct direct correlation between human development and
globalization. However, the positive effects are neutralized by the negative indirect
effects of globalizationby way of debilitated state power, nd increased social
2The inspiration is an indirect one; it provided motivation in the face of
discouragement that such research is futile and silly.
spending and instability. In the end only the impacts of political globalization are
positive, ‘whereas economic and social globalization do not generate favorable
influences when development level and regional differences [serve] as controls’ (see
paper abstract). There is room for another look.
Moreover, while it is common to see regressions of economic growth that take as
arguments institutional aspects like corruption and constitutions, evidence about a
direct connection between well-being and its deeper 'causes' is still scanty. Inspired
by works about the value of cultural goods and services such as Kinsey (2002),
Throsby (2001), and Baumol and Bowen (1966), Amavilah (2OO8a) supposes a
relationship between national flags and national flag colors and HDI across 93
nations in 2007.2 He finds an inverse correlation between HDI and flag colors and a
positive relationship between flag existence and HDI. In another paper Amavilah
(2OO8b) also argues for a relationship between HDI on one side, and flags, flag colors,
number of original articles in a constitution, and number of constitutional changes on
the other. Again the results confirm the first paper, in addition to revealing negative
coefficients of the number of original articles of constitution, and number of
constitutional changes. The current paper augments Amavilah (2008a) by making
HDI a function of conventional factors and forces, national symbols, and
This section outlines the model, data, and the model estimations.
To quantify the effects of national symbols and globalization on the national well-
being of nations, I measure well-being by the human development index (HDI). I
follow the conventional wisdom in preferring HDI to per capita GDP because HDI is
a broader measure of human socio-economic development. It includes the knowledge
(education) of the population (H1), the health (life-expectancy) of the population
(H2), and the per capita material condition of the population (Y), see, e.g., Clark and
However, we also know from the works of Myrdal (1968), Blaug (1970), Cohn
(I979), Schultz (1981), Becker (1996), and many others that H1 and H2 are elements
of the human capital (H) component of the economically-active population (N).
Thus, human well-being indexed by N can be stated as
3For the list of countries in this subsample of 88 and the whole sample of 93 see
Amavilah (2008a). For the subsample of 59 countries see Amavilah (2008b).
where a1 and a2 are weights. Moreover, Amavilah (2008c) argues that basing H on
the quality of labor (L) alone overestimates its importance. Rather,
we can claim that
, such that
where q is a vector of measures of the quality attributes of N. Now, if we suppose
that the material conditions (Y) of N evolve according to the Cobb-Douglas
transformation, and that L grows exogeneously at the rate n equal to the rate of
growth of N, then
where A = state of technology, L = labor, and K = physical capital. This means that
inserting (2) and (3) into (1) and simplifying gives
where t = 1 for cross-section data. Set
dividing through (4) by N and taking the natural logarithms on both sides leads to
3.2. Data and data sources
I focus on 88 countries for which data is readily available (see also Amavilah, 2008a,
b).3 The data for HDI, N, and n are available from different places, including the
UNDP's World Human Development Reports (WDRs, various), the CIA's World
Factbook (various), and Wikipedia (2008). I rely on WDRs. Capital (K, k) is the
percentage of GDP that goes into fixed capital formation as given by the IMF's
Table 1 - Descriptive statistics
4I acknowledge Dr Axel Dreher for an extended email conversation he and I had
about his papers and the KOF globalization. As usual, I attribute no blame to him for my
International Financial Statistical (IFS) Yearbook (2007). Human capital (H) has
two dimensions: Literacy rate/education (H1) and life expectancy (health) at birth
(H2). GDP (PPP) (Y) is per capita GDP in terms of purchasing power parity (PPP).
H1, H2, and Y are available from a variety of sources including the IFS, CIA, and
The two key variables of interest are national symbols and global interactions. As
indicated above, I represent national symbols and global interactions by national
flags and national flag colors, and globalization, respectively. To generate dummy
variables for national symbols, let White indicate the existence of a flag for each
country. Scanning national flags indicates that Blue (B), Red (R), Yellow (Y), Green
(G), and Black (BI) as common flag colors (see photius.com, 2008, flagpedia.net,
2008). Next I arbitrarily set W = 5, B = 4, R = 3, Y = 2, and Bl = 1 From here the
values of other colors are arbitrary combinations of dominant colors. For example
Green = Y x B = 2 x 4 = 8, Purple = Blue x Red = 4 x 3 = 12, and so on. Two
examples: The U.S. flag is Red, White, and Blue, on White. Since White on White is
White, the value is White + Red + Blue = 5 + 3 + 4 = 12. Cameroon's flag is Green,
Red, and Yellow, set on White. The dummy value in this case = White + Green + Red
+ Yellow = 5 + 8 + 3 + 2 = 18. By examining national flags for all 88 countries in the
sample, dummy variables for flag colors were generated, see Amavilah (2008a, b).
http://globalization.kof.ethz.ch/, and in Axel Dreher (2003) and Dreher, Gaston, and
Martens (2008).4 They come in one aggregate and three disaggregates. The aggregate
is called the ‘Index of Globalization’ (aGlobe). The three disaggregates are the ‘Index
of Economic Globalization’ (eGlobe), ‘Index of Social Globalization’ (sGlobe), and the
‘Index of Political Globalization’ (pGlobe). Table 1 presents descriptive statistics.
are KOF data available and explained at
Regional dummies take the value of one if a country is in a specific region and zero
otherwise. I divide the countries in five broad regions: Asia and Australia
(Australasia), Africa and the Middle East (AfriMidEast), North America
(NorthAmerica), South America (SouthAmerica), and Europe.
3.3 Model implementation
Eq. (5) is the estimation equation. It does no longer include Y and H, both
dimensions of HDI already. Instead, in q I include national symbols and measured
elements of global interactions, where, again, national symbols are national flags and
national flag colors, and global interactions are globalization that can be either
aggregate or disaggregate. In other words, (5) is
I use the OLS estimator on (6), making the usual White’s (1980) adjustments for
statistical problems. I err in favor of economic significance vis-a-vis statistical
significance. I calculate regional HDI as follows:
4. Preliminary results and their implications
4.1 Non-essential results
I first estimate H in (1) in its education/literacy rate (H1) and its health/life expectancy
(H2) dimensions, and obtain
Since then (6) is the equivalent of
Table 2 - National symbols, globalization, and national well-being
0.8389 0.0626 1.819[0.078]
Table 3 - National symbols, globalization, and national well-being
-1.819(-8.6)-1.863(-9.8) -1.841(-8.8) -1.811(-8.7)-1.857(8.5)
-1.224(-6.7) -1.288(-7.6)-1.263(-6.9) -1.204(-6.8)-1.259(-6.9)
0.8484 0.0607 1.645[0.166]
Given a from (1) or (8), and $, (, and * from (5) or (6), it is conceptually
easy to show that - the hat (^)
indicates estimated as opposed to actual values. However, while the
results in (8) and (9) are illustrative, they are not the focus of this paper!
Even so, one can say in passing that it appears that for this group of
countries life-expectancy and per capita GDP have the largest weights,
and the net weight of H is only 0.1704, much smaller than that of per
capita GDP(PPP) at 0.8278.
4.2 Essential results
Tables 2 and 3 present essential estimation results. Across both tables and all estimations
it is clear that conventional factors and forces of capital and labor affect national well-
being (HDI) in important ways. Although not always statistically significant at the
assumed 5% level, the positive effect of investment on HDI ranges from two to four
percent. National well-being responds negatively to the growth rate of population - a
familiar result. It seems that material conditions are important to the national well-being
of this group of countries.
The relationship between national symbols and national well-being is rather unstable.
Taken either as national flag colors ( White + other colors) or just dominant flag colors,
national symbols have a positive but insignificant effect on HDI, when considered
without globalization or alongside aggregate (overall) globalization (aGlobe). However,
when globalization is disaggregated into economic (eGlobe), social (sGlobe), and
political (pGlobe) globalization, the effects of national symbols become negative. This
result suggests that although national symbols are important aspects of national well-
being, nations gain more from global interactions than from national isolation.
By how much do nations gain from globalization? Estimation results indicate that a
dollar's worth of an increase (improvement) in overall globalization adds no less than
$0.60 to HDI. Economic globalization has the smallest effect on the HDI of this group of
countries, followed by political globalization. An improvement of one dollar in social
globalization, for example, leads to a significant increase of about $0.35 in HDI. That
economic globalization has the smallest effect on HDI is surprising, and appears to
render support to the opponents of free international trade and finance. However, the
result may also be an aberration due in part to the fact that the sample is comprised of a
large number of countries with very high HDI for which gains from economic and
political globalization are potentially smaller than from social globalization. In a way the
benefits of globalization are in enhancing the mutual interdependence of nations. The
scope for mutual interdependence is greater in the sphere of social globalization than in
the economic and political spheres.
Figure 1- National well-being under varying scenarios - Comparative statics I
Figure 2 - National well-being under varying scenarios - Comparative statics II
HDIHDI3AUHDI3AFHDI3NA HDI3SA HDI3EU
Figure 3 - National well-being under varying scenarios - Comparative statics III
0.25 0.350.450.550.65 0.750.850.95
HDI HDI4AUHDI4AFHDI4NA HDI4SAHDI4EU
Figure 4 - National well-being under varying scenarios - Comparative statics IV
The effects of globalization on HDI are not overestimated because even when
HDI=f(iGlobe) alone, the technical efficiency and magnitude of the estimates remain
unchanged as Columns 5 and 6 of Table 3 show. Also, the fixed regional effect are
all negative and of approximately the same order of magnitude. This outcome
suggests that the benefits of globalization are paid for by the loss of national
4.3 Some comparative statics
Figures 1-4 present some simple comparative statics based on a number of
variations of (7). HDI1 is HDI assuming the determination of well-being is invariant
with respect to globalization and regional effects. This HDI is the base case; it
particularly underestimates high HDIs as Figure 1 shows. Also in Figure I are
HDI2A and HDI2B, which derive from Estimations 2.1 and 2.2 where HDI2A
depends on conventional factors and forces, average globalization (aGlobe), and
national symbols. Regional effects are excluded. HDI2B is HDI2A with
globalization disaggregated into economic (eGlobe), social (sGlobe) and political
(pGlobe) globalization. There is noticeable improvement in the explanatory power
From Estimation 2.6 comes HDI3i as a function of conventional factors and forces,
national symbols, disaggregate globalization, and regional dummies. There they are
labeled as HDIAU for Australasia, HDIAF for Africa and the Middle East, HDINA
for North America, HDISA for South America, and HDIEU for Europe. These HDIs
underestimate the true HDI.
Another case of comparative statics is calculated from Estimation 3.4, assuming that
globalization and regional dummies, and that there are no national symbols. This
case, as Figure 3 portrays, gives the best results.
The final two cases involve HDI5A and HDI5B. In HDI5A well-being is influenced
by disaggregate globalization as in Estimation 3.6. For HDI5B well-being depends
on national symbols alone. These results are in Figure 4. Both indices are
reasonable, but HDI5B tracks the data better. In sum: HDI2A and HDI2B do a fairly
good job, but HDI1 and HDI5A understate high HDI, overestimate middle HDI, and
averages low HDI. All of HDI3 does a poor job. The best fits in this scenario are
HDI4 and HDI5A.
5. Tentative concluding remarks
In this paper I quantify the effects of national symbols and global interactions on the
national well-being of 88 countries in 2007. I utilize a simple production function
approach by which national well-being (measured as HDI) depends on national
symbols and globalization. I find the following: First, there is a positive correlation
between HDI and investment in physical capital, and a negative effect on HDI from
the growth of population. Second, national well-being has a weak and unstable
relationship with proxies of national symbols. In some instances national symbols
appear to promote national well-being although in an insignificant fashion. In other
instances HDI is significantly inelastic with respect to national symbols. Third,
globalization has larger and positive effects on HDI than other variables. However,
when globalization is disaggregated, social globalization has the largest effect on
HDI compared to economic and political globalization. Finally, fixed regional
effects are of the same magnitude and negative sign.
From these results one may conclude that, despite its limitations, per capita GDP
(PPP) remains an important determinant of national well-being. The policy
implication of this conclusion is to increase investment in the material conditions,
and good management, of the population.
The instability of the effects of national symbols suggests that, in net, such effects
are tenuous, which does not mean they are economically insignificant. What it
means is that considered in relation to the positive effect of globalization, nations
gain more from global interactions with other nations than from national isolation.
For this sample of 88 countries social globalization has a larger effect on HDI than
economic and political globalization. Although this conclusion differs from Axel
Dreher's (2003) by which ‘globalization promotes economic growth,’ it makes good
sense; it suggests that the internationalization and nationalization of well-being rub
against one another, creating a friction that weighs down the positive effects of
both. Of course, such an assertion must be taken with a grain of salt considering the
weaknesses of the paper, chief among them the simple modeling and estimation
methods it follows. However, the weakness is also an opportunity for further
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