Structure and Response in the World Trade Network

TL;DR

This paper analyzes how globalization and recessions have transformed the structure of the world trade network over 40 years, revealing increased sensitivity to shocks and a temporary rise in hierarchy post-recession.

Contribution

It introduces a dynamic analysis of the evolving world trade network, linking structural changes to globalization and economic shocks, and predicts increased sensitivity and hierarchy.

Findings

Trade network is more sensitive to shocks now than 40 years ago.

Recessions temporarily increase the hierarchical structure of global trade.

The world trade network recovers more slowly from shocks due to structural changes.

Abstract

We examine how the structure of the world trade network has been shaped by globalization and recessions over the last 40 years. We show that by treating the world trade network as an evolving system, theory predicts the trade network is more sensitive to evolutionary shocks and recovers more slowly from them now than it did 40 years ago, due to structural changes in the world trade network induced by globalization. We also show that recession-induced change to the world trade network leads to an \emph{increased} hierarchical structure of the global trade network for a few years after the recession.