Emerging Countries and Trends in the World Trade Network: A Link Analysis Approach

Abstract

Abstract The landscape in the world trade network has changed in last few decades. This paper analyses World Trade Network (WTN) from 1990 to 2016, using the trade data available at the International Monetary Fund (IMF) website and presents the evolution of key players in the network using link analysis properties. Link Analysis analyzes the link strength between nodes of a network to evaluate the properties of the network. The paper uses link analysis algorithm such as PageRank, hubs, and authority to evaluate the strength or importance of nodes in the World Trade Network. A higher PageRank represents higher import dependencies, higher authority scores of a country denotes its significance to import from other hub countries, and a higher hub score indicates a country’s significance to export their final product to other authority sectors. The findings show the emergence of Asian countries, especially China, as key players in the world. Key Words: World Trade Network, link analysis, PageRank, Authority, Hubs Introduction The value of global total export in the year 2016 is almost five (4.96) times the value in the year 1990. This fivefold growth in trade value is largely contributed by Emerging Market Economics (EMEs) \cite{Riad2012}. This indicates trade plays a vital role in the national economy as well as in the international economy. In this context, studying world trade from complex network perspectives provides meaningful insights. World Trade Network (WTN) is weighted directed complex network of countries around the world. In network science, a network is a collection of nodes and links, links are relations between the nodes and, in graph theory, a graph is a collection of vertices and edges, where edges are a relationship between vertices. Graph and Network are terms used interchangeably in this paper. For the WTN nodes are represented by the countries around the world and link represents the relationship between two countries, where the relationship is a flow of trade from one country to another. Study of the WTN applying network and graph theory framework has been growing and could be found in these works of literature \cite{Reyes2014,Deguchi2014} \cite{Ermann2011,Benedictis2010}. This paper uses link analysis algorithms to analyze the WTN. Link analysis extracts information from a connected structure like the WTN \cite{Chakraborty}. Understanding such connected structure of trade furnish an immense source of information about the world economy, and this paper uses approaches, which was initially adopted to understand the World Wide Web (WWW) \cite{Kleinberg1999}. Link analysis methods are also used to identify the expert in Social Network \cite{Kardan2011}. This paper Link analysis algorithms HITS (Hypertext Induced Topic Search) \cite{Kleinberg1999}and PageRank \cite{Page1998} algorithms are used to find the importance of countries based on the value export amount from one country to another. HITS and PageRank are also among the most frequently cited web information retrieval algorithms (Langville & Meyer, 2005). Link Analysis of the WTN gives importance value to the countries of the WTN. This paper study and analyze the WTN data from 1990 to 2016 as a weighted-directed network. Using the graph framework and applying link analysis perspectives, the paper tries to figure out the emerging countries and their evolution during the study period. The following section describes the link analysis algorithms used in the study and the subsequent section describes and discusses the finding.Hits Algorithm HITS algorithm is also known as hubs and authorities algorithm (Kleinberg, 1999). This algorithm gives hubs and authority ranking for each member of the network. Hubs score of a node represents the sum of the authority score of all of the nodes which are pointing to this node. The authority score represents the sum of the hub score of all nodes pointing to this node. Hubs and authorities exhibit a mutually reinforcing relationship: a good hub is a node that points to many good authorities; a good authority is a node that is pointed to by many good hubs (Kleinberg, 1999). In the WTN hubs are countries with large export value and export to good authority countries, and authority is a country with large import values and import from good hubs countries.