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The Heckscher-Ohlin Model and the Network Structure of International Trade

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  • Baskaran, Thushyanthan
  • Blöchl, Florian
  • Brück, Tilmann
  • Theis, Fabian J.

Abstract

This paper estimates for 28 product groups a characteristic parameter that reflects the topological structure of its trading network. Using these estimates, it then describes how the structure of international trade has evolved during the 1980-2000 period. Thereafter, it demonstrates the importance of networks in international trade by explicitly accounting for their scaling properties when testing the prediction of the Heckscher-Ohlin model that factor endowment differentials determine bilateral trade flows. The results suggest that differences in factor endowments increase bilateral trade in goods that are traded in "dispersed" networks. For goods that are traded in "concentrated" networks, factor endowment differentials are less important.

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File URL: http://mpra.ub.uni-muenchen.de/30187/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30187.

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Date of creation: 2010
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Publication status: Published in International Review of Economics and Finance 2.20(2011): pp. 135-145
Handle: RePEc:pra:mprapa:30187

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Keywords: Networks; international trade; gravity model;

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  1. D. Garlaschelli & M. I. Loffredo, 2005. "Structure and Evolution of the World Trade Network," Papers physics/0502066, arXiv.org, revised May 2005.
  2. Florian Blöchl & Fabian J. Theis & Fernando Vega-Redondo & Eric O'N. Fisher, 2010. "Which Sectors of a Modern Economy are most Central?," CESifo Working Paper Series 3175, CESifo Group Munich.
  3. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521857406, April.
  4. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  5. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  6. Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2010. "The evolution of the world trade web: a weighted-network analysis," Journal of Evolutionary Economics, Springer, vol. 20(4), pages 479-514, August.
  7. Hakura, Dalia S., 2001. "Why does HOV fail?: The role of technological differences within the EC," Journal of International Economics, Elsevier, vol. 54(2), pages 361-382, August.
  8. Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2007. "The Evolution of the World Trade Web," LEM Papers Series 2007/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  9. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
  10. Garlaschelli, Diego & Loffredo, Maria I., 2005. "Structure and evolution of the world trade network," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 138-144.
  11. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
  12. Vega-Redondo,Fernando, 2007. "Complex Social Networks," Cambridge Books, Cambridge University Press, number 9780521674096, April.
  13. Davis, Donald R. & David E. Weinstein & Scott C. Bradford & Kazushige Shimpo, 1997. "Using International and Japanese Regional Data to Determine When the Factor Abundance Theory of Trade Works," American Economic Review, American Economic Association, vol. 87(3), pages 421-46, June.
  14. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  15. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  16. Raja Kali & Javier Reyes, 2007. "The architecture of globalization: a network approach to international economic integration," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 595-620, July.
  17. Wilhite, Allen, 2001. "Bilateral Trade and 'Small-World' Networks," Computational Economics, Society for Computational Economics, vol. 18(1), pages 49-64, August.
  18. Thushyanthan Baskaran & Tilman Brück, 2005. "Scale-Free Networks in International Trade," Discussion Papers of DIW Berlin 493, DIW Berlin, German Institute for Economic Research.
  19. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
  20. M. Goldstein & S. Morris & G. Yen, 2004. "Problems with fitting to the power-law distribution," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 41(2), pages 255-258, 09.
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