Towards Trade Equalisation: A Network Perspective on Trade and Income Convergence Across the Twentieth Century

An enduring dynamic of the twentieth century is the dramatic expansion of global trade with increased partners, goods, frequency and volumes. Most trade explanations such as the Heckscher-Ohlin, new trade theory, gravity models, and Ricardo and Sraffa focus on how bilateral import and export volumes and intermediate input goods are driven by decreased financial and information transaction costs. Extending work on trade flows and economic development, we derive several network measures of degree, betweenness and eigenvector centrality from dyadic trade flows from 1960 to 2009. We then empirically explore the interactive effects of trade connectivity, economic production and stages of development on income convergence and trade equalisation. We empirically find clear patterns towards a new phenomenon, both sigma levels and beta rates trade convergence and equalisation for our entire sample. Visualising sigma and beta convergence for seven major trading nations from 1920 to 2010, we believe offers new insights into economic development theory if only beginning to loosen the knot of trade, growth and globalisation.