Abstract
The research on core-periphery structure of global trade from a complex-network perspective has shown that the world system is hierarchically organized into blocks and that countries play different roles in the world economy. Yet, little attention has been paid to investigating whether the sectoral international trade networks conform to a core-periphery structure, hence what is the role of different levels of processing in creating and maintaining structural inequality. This issue is of particular importance given the contemporary focus upon global production networks and reshaping of the international division of labor. With this in mind, we propose a model (LARDEG) from network science to reexamine old theories in economics, such as core-periphery structures in sectoral international trade networks and test whether the global value chains have changed structural positions in terms of the level of processing. The economic background of our model permitting a more accurate sorting of countries into structural positions and the general stability of results have provided for a more solid measurements than has hereto been possible. Our algorithm naturally produces networks with hierarchically nested block structure obtained from an iterative decomposition of the network periphery such that each block represents a vertex set of a maximal size sub-graph existing at different levels. The results not only lend support to the previous hierarchical model of the world-system (core, semi-periphery, and periphery) but also find that, depending on particular industry, the number of analytically identifiable blocks could be more than three. We show that ‘size effect’ is the one that prevails for core block membership at the first hierarchical level, while the GNI per capita is a much poorer proxy for the world-system status. Moreover, the patterns of blocks we label as the second- or third-level ‘core’ are strongly dependent on distance and geographical proximity. Overall, the various configurations of asymmetrical trade patterns between our blocks and the remarkably stable position of core countries at the top of structure clearly indicate that the rise of global production networks has actually restored a huge and unequal international division of labor splitting the world into ‘headquarter’ and ‘factory’ economies.
Highlights
The ‘world-system’ and ‘dependency’ theory assert that the structure of the world economy produces international inequality
Put differently, developing countries are poor as a result of their trade specialization and embeddedness in the global trading system, in which the core countries settle on a diverse set of knowledgeintensive and value-added products, while the peripheral developing countries specialize in exports of simple resource and labor exploiting products to higher blocks of the hierarchy [3,4,5]
We will compare results obtained from our algorithm to those from alternative models, that is (1) the deterministic block model for weighted directed networks that uses regular equivalence implemented with REGE algorithm; (2) the stochastic block-model (SBM) for weighted directed networks; (3) the continuous multiplicative core-periphery model for weighted directed networks, implemented with MINRES/SVD algorithm
Summary
The ‘world-system’ and ‘dependency’ theory ( known as the core-periphery theory) assert that the structure of the world economy produces international inequality. Put differently, developing countries are poor as a result of their trade specialization and embeddedness in the global trading system, in which the core countries settle on a diverse set of knowledgeintensive and value-added products (required by all parts of the world economy), while the peripheral developing countries specialize in exports of simple resource and labor exploiting products to higher blocks of the hierarchy [3,4,5]. To what extent changes in the international division of labor have led to upward (or downward) mobility of countries in the core-periphery structure? Is there a real benefit of GVCs participation for developing countries in terms of long-term impact on capacity building and sustainability of the local industrial base or it results in different forms of dependence and reproduction of global inequality [10]? A critical question is is traditional core-periphery structure of international trade still alive? To what extent changes in the international division of labor have led to upward (or downward) mobility of countries in the core-periphery structure? Is there a real benefit of GVCs participation for developing countries in terms of long-term impact on capacity building and sustainability of the local industrial base or it results in different forms of dependence and reproduction of global inequality [10]?
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