A Network of Networks Perspective on Global Trade.

Abstract

Mutually intertwined supply chains in contemporary economy result in a complex network of trade relationships with a highly non-trivial topology that varies with time. In order to understand the complex interrelationships among different countries and economic sectors, as well as their dynamics, a holistic view on the underlying structural properties of this network is necessary. This study employs multi-regional input-output data to decompose 186 national economies into 26 industry sectors and utilizes the approach of interdependent networks to analyze the substructure of the resulting international trade network for the years 1990-2011. The partition of the network into national economies is observed to be compatible with the notion of communities in the sense of complex network theory. By studying internal versus cross-subgraph contributions to established complex network metrics, new insights into the architecture of global trade are obtained, which allow to identify key elements of global economy. Specifically, financial services and business activities dominate domestic trade whereas electrical and machinery industries dominate foreign trade. In order to further specify each national sector's role individually, (cross-)clustering coefficients and cross-betweenness are obtained for different pairs of subgraphs. The corresponding analysis reveals that specific industrial sectors tend to favor distinct directionality patterns and that the cross-clustering coefficient for geographically close country pairs is remarkably high, indicating that spatial factors are still of paramount importance for the organization of trade patterns in modern economy. Regarding the evolution of the trade network's substructure, globalization is well-expressed by trends of several structural characteristics (e.g., link density and node strength) in the interacting network framework. Extreme events, such as the financial crisis 2008/2009, are manifested as anomalies superimposed to these trends. The marked reorganization of trade patterns, associated with this economic crisis in comparison to "normal" annual fluctuations in the network structure is traced and quantified by a new widely applicable generalization of the Hamming distance to weighted networks.