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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 inten- sive 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 suc- cessful 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 char- acterized 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 Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 1005.

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Date of creation: 2010
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Handle: RePEc:trn:utwpde:1005

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Phone: +39-461-882201
Fax: +39-461-882222
Web page: http://www.unitn.it/deco
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Related research

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

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References

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  1. Matthieu Crozet & Pamina Koenig, 2010. "Structural gravity equations with intensive and extensive margins," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 41-62, February.
  2. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self Discovery," CEPR Discussion Papers 3356, C.E.P.R. Discussion Papers.
  3. Armenter, Roc & Koren, Miklós, 2010. "A Balls-and-Bins Model of Trade," CEPR Discussion Papers 7783, C.E.P.R. Discussion Papers.
  4. 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.
  5. Massimo Riccaboni & Stefano Schiavo, 2009. "The Structure and Growth of Weighted Networks," Papers 0908.0348, arXiv.org, revised Dec 2009.
  6. Tibor Besedes & Thomas J. Prusa, 2007. "The Role of Extensive and Intensive Margins and Export Growth," NBER Working Papers 13628, National Bureau of Economic Research, Inc.
  7. 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 0901, Department of Computer and Management Sciences, University of Trento, Italy, revised 11 Jun 2009.
  8. Sebastian Krautheim, 2007. "Gravity and Information: Heterogeneous Firms, Exporter Networks and the 'Distance Puzzle'," Economics Working Papers ECO2007/51, European University Institute.
  9. 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.
  10. Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2007. "On the Topological Properties of the World Trade Web: A Weighted Network Analysis," Papers 0708.4359, arXiv.org.
  11. Mauro Napoletano & Jackie Krafft & Andrea Roventini, 2006. "Are output growth-rate distributions fat-tailed? Some evidence from OECD countries," Sciences Po publications 36, Sciences Po.
  12. 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.
  13. D. Garlaschelli & M. I. Loffredo, 2005. "Structure and Evolution of the World Trade Network," Papers physics/0502066, arXiv.org, revised May 2005.
  14. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2009. "The margins of US trade," LSE Research Online Documents on Economics 33830, London School of Economics and Political Science, LSE Library.
  15. Fu, Dongfeng & Pammolli, Fabio & Buldyrev, Sergey V. & Riccaboni, Massimo & Matia, Kaushik & Yamasaki, Kazuko & Stanley, H. Eugene, 2005. "The Growth of Business Firms: Theoretical Framework and Empirical Evidence," MPRA Paper 15905, University Library of Munich, Germany.
  16. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  17. Giorgio Fagiolo & Javier Reyes & Stefano Schiavo, 2008. "The World-Trade Web: Topological Properties, Dynamics, and Evolution," Sciences Po publications 2008/16, Sciences Po.
  18. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  19. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
  20. D. Garlaschelli & M. I. Loffredo, 2004. "Fitness-dependent topological properties of the World Trade Web," Papers cond-mat/0403051, arXiv.org, revised Oct 2004.
  21. Growiec, Jakub & Pammolli, Fabio & Riccaboni, Massimo & Stanley, H. Eugene, 2008. "On the size distribution of business firms," Economics Letters, Elsevier, vol. 98(2), pages 207-212, February.
  22. 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.
  23. Paulo Guimarães & Octávio Figueiredo & Douglas Woodward, 2008. "Dartboard Tests for the Location Quotient," FEP Working Papers 273, Universidade do Porto, Faculdade de Economia do Porto.
  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. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090, arXiv.org.
  26. 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, vol. 5(2-3), pages 574-584, 04-05.
  27. Cesar A. Hidalgo & Ricardo Hausmann, 2009. "The Building Blocks of Economic Complexity," Papers 0909.3890, arXiv.org.
  28. 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.
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