Substitution and Stratification: The Interplay between Dyadic and Systemic Proximity in Global Trade, 1993–2005

This article examines the interplay of homophily (similarity breeds connection) at two levels in international trade—dyadic similarity (geographic, political, and cultural proximity) and systemic similarity (structural equivalence and world-system status). First, there is a substitution effect between dyadic homophily and systemic homophily from structural equivalence. Both types of homophily generate favorable social structure that facilitates international trade. The existence of structural equivalence lessens the dependence of bilateral trade on dyadic homophily. Second, there is a stratification effect of world-system status on dyadic homophily. Geographic homophily matters the most for bilateral trade between two noncore countries, while political and cultural homophily is the most influential for trade between a core country and a noncore country. These two findings have important implications. The substitution effect of structural equivalence prevents international trade from complete fragmentation along geographic, political, and cultural lines, while the stratification effect of world-system status reveals unequal capacity across countries to overcome the structural constraints imposed by dyadic homophily.

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