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Modeling the International-Trade Network: A Gravity Approach

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  • Marco Duenas
  • Giorgio Fagiolo

Abstract

This paper investigates whether the gravity model (GM) can explain the statistical properties of the International Trade Network (ITN). We fit data on international-trade flows with a GM specification using alternative fitting techniques and we employ GM estimates to build a weighted predicted ITN, whose topological properties are compared to observed ones. Furthermore, we propose an estimation strategy to predict the binary ITN with a GM. We find that the GM successfully replicates the weighted-network structure of the ITN, only if one fixes its binary architecture equal to the observed one. Conversely, the GM performs very badly when asked to predict the presence of a link, or the level of the trade flow it carries, whenever the binary structure must be simultaneously estimated.

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Bibliographic Info

Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2011/25.

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Date of creation: 15 Dec 2011
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Handle: RePEc:ssa:lemwps:2011/25

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Keywords: International Trade Network; Gravity Equation; Weighted Network Analysis; Topological Properties; Econophysics;

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References

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Citations

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Cited by:
  1. Marco Duenas & Giorgio Fagiolo, 2013. "Global Trade Imbalances: A Network Approach," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2013/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Francesco Picciolo & Tiziano Squartini & Franco Ruzzenenti & Riccardo Basosi & Diego Garlaschelli, 2012. "The role of distances in the World Trade Web," Papers 1210.3269, arXiv.org, revised Oct 2012.
  3. Chiarucci, Riccardo & Ruzzenenti, Franco & Loffredo, Maria I., 2014. "Detecting spatial homogeneity in the World Trade Web with Detrended Fluctuation Analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 401(C), pages 1-7.
  4. Riccardo Chiarucci & Franco Ruzzenenti & Maria I. Loffredo, 2013. "Detecting spatial homogeneity in the world trade web with Detrended Fluctuation Analysis," Papers 1308.0526, arXiv.org, revised Nov 2013.
  5. Angela Abbate & Luca De Benedictis & Giorgio Fagiolo & Lucia Tajoli, 2012. "The International Trade Network in Space and Time," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2012/17, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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