Globalisation and Sustainable Development: How Economic Diplomacy Shapes SDG Performance Across Countries and Time

This study examines whether economic diplomacy—proxied by KOF-based indicators of political globalisation and economic policy openness—is associated with multidimensional sustainable development (SD) across 208 countries over the period 2000–2023. Using two-way fixed-effects panel models with Driscoll–Kraay standard errors, complemented by instrumental-variable and dynamic panel checks, we find a positive but modest within-country association between diplomatic embeddedness and Sustainable Development Goal (SDG) performance. The association is driven primarily by political globalisation—reflecting diplomatic networks, international organisation membership, and treaty engagement—rather than trade policy openness. De facto integration exhibits stronger links to SDG outcomes than de jure policy indicators. The relationship is concave, with diminishing marginal returns beyond a diplomacy proxy value of approximately 60. A latent-class framework identifies two institutional archetypes: the association is more pronounced and robust under stronger governance (71 countries), while it attenuates under weaker governance (85 countries). Goal-level estimates reveal systematic trade-offs—gains in inequality reduction (SDG 10) and innovation (SDG 9) alongside adverse associations with climate outcomes (SDG 13)—and a structural breakpoint around 2017 consistent with the onset of slowbalisation. The results suggest that diplomacy can support SD, but its payoff depends on governance capacity and the management of cross-goal externalities.