Modeling the Effect of Social-Network on Interregional Trade of Services: How Sensitive Are the Results to Alternative Measures of Social Linkages

Recent literature has investigated the impact of social and business networks on the intensity of trade in goods between countries and within countries and the role played by these networks in the reduction of the border effect. This literature has found that such flows are positively correlated with migration stocks between pairs of countries/regions as well as firms linked through their stakeholders. In this study we investigate whether any such relation holds for interregional trade in services, focusing on the case of Spanish intra- and interregional monetary flows generated by certain domestic tourism sectors: namely, the hospitality and restaurant industries and travel agencies. With this aim, we develop a gravity model that captures spatial and network dependence attributable to demographic links between regions. In a previous paper we found that interregional network links had an enhancing effect on trade in services, when they were computed with stocks of immigrants born in exporting region and residing in the importing region. In this extension we explore a number of alternative sources for the information and taste effects. To this end, we consider such alternative mechanisms for face-to-face interaction as “mixed marriages”, second-home stocks and previous tourist flows, as well as other sources of social interaction (interregional mail and parcel deliveries; professional interactions through the trade in goods, etc.).