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The Structure and Growth of International Trade

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  • Massimo Riccaboni
  • Stefano Schiavo

Abstract

The paper develops a model of proportionate growth to describe the dynamics of international trade flows. We show that a large number of the empirical regularities characterizing international trade — such as the fraction of zero trade flows across pairs of countries, the positive relationship between intensive and extensive margins, the high concentration of trade with respect to both products and destinations, the core-periphery structure of exchanges — are well explained by this simple stochastic setup. This helps us to distinguish among economically relevant regularities and those simply resulting from the mechanical interactions among agents. Furthermore, our model can be used to describe the process of 'self-discovery' that lie at the foundations of successful export-led growth and is thought to play a crucial role in the process of economic development. Our model correctly predicts that large export flows are rare events, as pointed out in the empirical literature: yet, countries characterized by large 'discovery' efforts are much more likely to draw a 'big hit' due to the (very skewed) shape of the distribution of bilateral export flows.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_032.

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Length: 28 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:deg:conpap:c015_032

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Keywords: international trade; development; weighted networks; proportionate growth; industrial policy;

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References

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  1. Raja Kali & Javier Reyes, 2010. "Financial Contagion On The International Trade Network," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 1072-1101, October.
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
  3. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2009. "The Margins of US Trade," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 487-93, May.
  4. Sebastian Krautheim, 2007. "Gravity and Information: Heterogeneous Firms, Exporter Networks and the 'Distance Puzzle'," Economics Working Papers, European University Institute ECO2007/51, European University Institute.
  5. Massimo Riccaboni & Stefano Schiavo, 2009. "The Structure and Growth of Weighted Networks," Papers 0908.0348, arXiv.org, revised Dec 2009.
  6. Massimo Riccaboni & Fabio Pammolli & Sergey V. Buldyrev & Linda Ponta & H. Eugene Stanley, 2009. "The Size Variance Relationship of Business Firm Growth Rates," DISA Working Papers, Department of Computer and Management Sciences, University of Trento, Italy 0901, Department of Computer and Management Sciences, University of Trento, Italy, revised 11 Jun 2009.
  7. Roc Armenter & Miklós Koren, 2008. "A Balls-and-Bins Model of Trade," CeFiG Working Papers, Center for Firms in the Global Economy 3, Center for Firms in the Global Economy, revised 01 May 2008.
  8. Fagiolo, Giorgio & Reyes, Javier & Schiavo, Stefano, 2008. "On the topological properties of the world trade web: A weighted network analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 387(15), pages 3868-3873.
  9. Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2008. "The World-Trade Web: Topological Properties, Dynamics, and Evolution," Sciences Po publications 2008/16, Sciences Po.
  10. Sergey V. Buldyrev & Jakub Growiec & Fabio Pammolli & Massimo Riccaboni & H. Eugene Stanley, 2007. "The Growth of Business Firms: Facts and Theory," Journal of the European Economic Association, MIT Press, MIT Press, vol. 5(2-3), pages 574-584, 04-05.
  11. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, Elsevier, vol. 96(2), pages 371-379, November.
  12. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3381, C.E.P.R. Discussion Papers.
  13. K. Bhattacharya & G. Mukherjee & J. Saramaki & K. Kaski & S. S. Manna, 2007. "The International Trade Network: weighted network analysis and modelling," Papers 0707.4343, arXiv.org, revised Mar 2008.
  14. Matthieu Crozet & Pamina Koenig, 2008. "Structural Gravity Equations with Intensive and Extensive Margins," Working Papers 2008-30, CEPII research center.
  15. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 98(4), pages 1707-21, September.
  16. Dongfeng Fu & Fabio Pammolli & S. V. Buldyrev & Massimo Riccaboni & Kaushik Matia & Kazuko Yamasaki & H. E. Stanley, 2005. "The Growth of Business Firms: Theoretical Framework and Empirical Evidence," Papers physics/0512005, arXiv.org.
  17. Ricardo Hausmann & Dani Rodrik, 2002. "Economic Development as Self-Discovery," NBER Working Papers 8952, National Bureau of Economic Research, Inc.
  18. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  19. Guimarães, Paulo & Figueiredo, Octávio & Woodward, Douglas, 2009. "Dartboard tests for the location quotient," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(3), pages 360-364, May.
  20. Yamasaki, Kazuko & Matia, Kaushik & Buldyrev, Sergey V. & Fu, Dongfeng & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2004. "Preferential attachment and growth dynamics in complex systems," MPRA Paper 15908, University Library of Munich, Germany, revised 06 Feb 2006.
  21. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2006. "Are Output Growth-Rate Distributions Fat-Tailed? Some Evidence from OECD Countries," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2006/23, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  22. D. Garlaschelli & M. I. Loffredo, 2005. "Structure and Evolution of the World Trade Network," Papers physics/0502066, arXiv.org, revised May 2005.
  23. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
  24. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  25. Growiec, Jakub & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2008. "On the size distribution of business firms," Economics Letters, Elsevier, Elsevier, vol. 98(2), pages 207-212, February.
  26. Garlaschelli, Diego & Loffredo, Maria I., 2005. "Structure and evolution of the world trade network," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 355(1), pages 138-144.
  27. D. Garlaschelli & M. I. Loffredo, 2004. "Fitness-dependent topological properties of the World Trade Web," Papers cond-mat/0403051, arXiv.org, revised Oct 2004.
  28. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, Elsevier, vol. 70(2), pages 339-358, December.
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