The Global Networks of Trade and Preferential Trade Agreements

Globalization makes countries connected via global networks of trade and preferential trade agreements (PTAs). Some countries are centers (or hubs) of the networks, while others are spokes (links to the centers). In this study, we first define hub-ness and hubs as two features of the global trade-cum-PTA network structures. We then add these hub-ness and hub factors to the standard gravity model to estimate their effects on the determination of PTA formation. Using data from 1973 to 2015, which covers 162 countries, our empirical analysis corroborates that a bilateral PTA is more likely to be signed if one of the countries is a hub or if each country’s hub-ness is large. This finding is robust to different specifications of the model and definitions of hub-ness and hub, including a sub-sample in which China is the only importing country. We also find interesting heterogeneous effects of hub-ness and hubs