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Modeling the International-Trade Network: A Gravity Approach

  • Marco Duenas
  • Giorgio Fagiolo

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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File URL: http://arxiv.org/pdf/1112.2867
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Paper provided by arXiv.org in its series Papers with number 1112.2867.

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Date of creation: Dec 2011
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Handle: RePEc:arx:papers:1112.2867
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