2008/10 LEM Working Paper Series

Using a complex weighted-network approach to assess the evolution of international economic integration: The cases of East Asia and Latin America

Javier Reyes, Giorgio Fagiolo, Stefano Schiavo
Networks; World trade web; international trade; weighted network analysis; integration; trade openness; LATAM vs. HPAE countries.

  JEL Classifications
F10, D85

Over the past four decades the High Performing Asian Economies (HPAE) have followed a development strategy based on the exposure of their local markets to the presence of foreign competition and on an outward oriented production. In contrast, Latin American Economies (LATAM) began taking steps in this direction only in the late eighties and early nineties, but before this period these countries were more focused on the implementation of import substitution policies. These divergent paths have led to sharply different growth performance in the two regions. Yet, standard trade openness indicators fall short of portraying the peculiarity of the Asian experience, and to explain why other emerging markets with similar characteristics have been less successful over the last 25 years. We offer an alternative perspective on the issue by exploiting recently-developed indicators based on weighted-network analysis. We study the evolution of the core-periphery structure of the World Trade Network (WTN) and, more specifically, the evolution of the HPAE and LATAM countries within this network. Using random-walk betweenness centrality measure, the paper shows that the HPAE countries are more integrated into the WTN and many of them, which were in the periphery in the eighties, are now in the core of the network. In contrast, the LATAM economies, at best, have maintained their position over the 1980 - 2005 period, and in some cases have fallen in the ranking of centrality.

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