Core and periphery in the world economy: an empirical assessment of the integration of the developing countries into the world economy

In this paper a dynamic structural vector-autoregressive model is utilized to analyze the impact of shocks from the developed center (G-7) on the less developed periphery. Three possibilities emerge with less developed nations being negatively dependent on the center, positively integrated with the center, or independent of the center. A less developed country is classified as negatively dependent when shocks from the center have a negative impact and are relatively important in explaining variations in the output of the developing country. A less developed country is positively integrated if the shocks from the center have positive effects and explain a large share of the variation in output in the developing country. The results indicate that from the sample of eighty-six developed countries only five could be considered dependent, while the others are roughly equally divided into those positively integrated and those that are independent.