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Stochastic Trade Networks

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Author Info

  • Massimo Riccaboni
  • Stefano Schiavo

Abstract

The paper develops a simple model to describe the dynamics of international trade flows. We show that such a setup is able to simultaneously match a large number of empirical regularities, 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. Our network model can thus be considered a useful stochastic benchmark for international trade theories. In particular, our stochastic approach is fully compatible with recent international trade models with heterogeneous firms. Our findings suggest that incorporating stochastic elements into standard trade models can improve their ability to explain relevant stylized facts of world trade.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c017_014.

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Length: 27 pages JEL Classification: F14, F43, O25
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:deg:conpap:c017_014

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Related research

Keywords: international trade; balls-and-bins; urn models; weighted networks; proportionate growth;

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References

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  24. 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.
  25. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
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  28. Marco Bee & Massimo Riccaboni & Stefano Schiavo, 2012. "A Trick of the (Pareto) Tail," Department of Economics Working Papers 1206, Department of Economics, University of Trento, Italia.
  29. Massimo Riccaboni & Stefano Schiavo, 2009. "The Structure and Growth of Weighted Networks," Papers 0908.0348, arXiv.org, revised Dec 2009.
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