Tuesday, October 1, 2013

Network Analysis in Macroeconomics and Development Literature

The figure below shows the network of countries based on the similarities in exports (or Product Space). Key finding of the paper: Countries are technologically similar to their neighbors.


'The figure above presents the network of export similarity for year 2008 as a graphical network where each node represent a country, and each country is connected to the two other countries with the most similar export baskets, as measured by the Export Similarity Index. Countries are colored according to geographic regions, showing that the clusters deļ¬ned by export similarity correlate strongly with physical distance. The width of the links is proportional to the similarity index and the color of the link indicates whether the similarity is driven by PRB products (blue) or by NPRB products (red) (see link for more details). We note that, in a large number of cases, the country with the most similar export structure is an immediate neighbor, such as in the case of France, Germany, Austria, the Czech Republic, Hungary and Slovakia or in the case of India, Pakistan, and Bangladesh. This visualization illustrates the strong association between proximity and export structure that characterizes the world economy.'

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