Complexity, Centralization, and Fragility in Economic Networks

TL;DR

This paper analyzes global trade networks, revealing that complex products are traded through more centralized and fragile networks, highlighting potential vulnerabilities in the global economy.

Contribution

It quantitatively links product complexity to network centralization and fragility using network science and product complexity indicators.

Findings

Higher complexity products are traded through more centralized networks.

Centralized trade networks are more vulnerable to disruptions.

Complexity correlates with increased fragility in global trade.

Abstract

Trade networks, across which countries distribute their products, are crucial components of the globalized world economy. Their structure is strongly heterogeneous across products, given the different features of the countries which buy and sell goods. By using a diversified pool of indicators from network science and product complexity theory, we quantitatively confirm the intuition that, overall, products with higher complexity -- i.e., with larger technological content and number of components -- are traded through a more centralized network -- i.e., with a small number of countries concentrating most of the export flow. Since centralized networks are known to be more vulnerable, we argue that the current composition of production and trading is associated to high fragility at the level of the most complex -- thus strategic -- products.