Nonlinear relationship between economic growth and nuances of globalisation with income stratification: Roles of financial development and governance

We study the effect of overall globalisation on economic growth in a neoclassical macroeconomic growth model. We further assess our model by considering the decomposed measures of globalisation including economic, political, and social globalisation components. To this end, we estimate panel data models by applying the cross-sectional dependency-autoregressive distributed lags (CS-ARDL) approach to a sample of 116 countries during the available period, 1980–2015. We classified our sample into upper middle-, lower middle-, and high-income groups to minimise country-specific heterogeneity. Our results affirm the presence of a quadratic (nonlinear) U-shaped relationship between the overall globalisation (including the economic, political, social components) and economic growth for the lower middle- and upper middle-income group. However, they provide evidence of a positive linear relationship…