International Trade, Development Traps, and the Core-Periphery Structure of Income Inequality

37 Pages Posted: 10 Jan 2019 Last revised: 18 Jan 2019

See all articles by Dominik Hartmann

Dominik Hartmann

University of Sao Paulo (USP); University of Hohenheim; Fraunhofer IMW

Mayra Bezerra

Fraunhofer Gesellschaft

Beatrice Lodolo

University of Hohenheim

Flavio L. Pinheiro

NOVA IMS - Universidade Nova de Lisboa

Date Written: January 8, 2019

Abstract

Research on economic complexity has shown that a country’s type of exports conditions its future path of economic diversification and economic growth. Yet little emphasis has been put on the inequality associated with the types of products traded between countries and different regions of the world. Here we analyze the income inequality associated with the imports and exports of 116 countries in the period from 1970 to 2010. Our analysis shows that methods from network science and visual complexity research can help to reevaluate old theories in economics, such as core-periphery structures in international trade or structural development traps. Our results illustrate that the core-periphery structure of global trade affects not only the income inequality between countries, but also the income inequality within countries. Moreover, they reveal the structural constraints that developing and emerging economies face in promoting inclusive growth and benchmark their productive transformations with cases of successful catching up and developed economies. The results show that countries, such as South Korea or Germany, have benefited from outsourcing high inequality products. In contrast, some middle-income countries, such as Brazil or South Africa, face structural development constraints consisting of a large average distance of their export products to low inequality products and a “gravitational force” towards high inequality products. Finally, developing economies, such as Nicaragua or Sri Lanka face a double development trap for inclusive growth, as their economies depend on both a large share of high inequality exports and imports.

Keywords: trade, inequality, economic complexity, core-periphery, development trap

Suggested Citation

Hartmann, Dominik and Bezerra, Mayra and Lodolo, Beatrice and Pinheiro, Flavio L., International Trade, Development Traps, and the Core-Periphery Structure of Income Inequality (January 8, 2019). Available at SSRN: https://ssrn.com/abstract=3312097 or http://dx.doi.org/10.2139/ssrn.3312097

Dominik Hartmann (Contact Author)

University of Sao Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

Fraunhofer IMW ( email )

Neumarkt 9
Leipzig, 04109
Germany

Mayra Bezerra

Fraunhofer Gesellschaft ( email )

Leonrodstrasse 54
D-80636 Munchen
Germany

Beatrice Lodolo

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

Flavio L. Pinheiro

NOVA IMS - Universidade Nova de Lisboa ( email )

Nova Information Management School
Universidade Nova de Lisboa, Campus de Campolide
Lisbon, 1070-312
Portugal

HOME PAGE: http://www.novaims.unl.pt/

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