When Does Globalization Benefit Us?

We investigate how the effect of trade and capital globalization on economic growth depends on social cohesion. To overcome endogeneity and countryspecific effect problem we use system GMM estimation of 93 countries from 1980-2000. To fully take into account the various aspects of globalization we estimate both de jour and de facto globalization effects using middle class income share as a proxy for social cohesion. Empirical results show that in most cases trade and capital globalization do not itself have a significant effect on growth. The effects of trade and capital globalization on economic growth significantly depend on social cohesion. But the relationship between globalization and social cohesion shows inverted U-curve, around upper region of threshold effect of globalization on growth diminishes even though the level of social cohesion become higher.