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Scale-Free Networks in International Trade

Author

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  • Thushyanthan Baskaran
  • Tilman Brück

Abstract

The paper analyzes the network structure of international trade. Adapting a network approach developed in the physical sciences, we propose that international trade functions like a scale-free network. For each commodity group we calculate a characteristic parameter which reflects the structure of its trading network. We then insert this variable into an expanded gravity model to explore the effect of the network structure on the value of bilateral trade. The estimation suggests that, inter alia, globalization has reduced the value of trade per product group.

Suggested Citation

  • Thushyanthan Baskaran & Tilman Brück, 2005. "Scale-Free Networks in International Trade," Discussion Papers of DIW Berlin 493, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp493
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.43299.de/dp493.pdf
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    References listed on IDEAS

    as
    1. Wilhite, Allen, 2001. "Bilateral Trade and 'Small-World' Networks," Computational Economics, Springer;Society for Computational Economics, vol. 18(1), pages 49-64, August.
    2. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, May.
    3. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, pages 7-35.
    4. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    5. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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    Citations

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    Cited by:

    1. Baskaran, Thushyanthan & Blöchl, Florian & Brück, Tilman & Theis, Fabian J., 2011. "The Heckscher-Ohlin model and the network structure of international trade," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 135-145, April.
    2. Lublóy, Ágnes & Szenes, Márk, 2007. "Az ügyfélelvándorlás kereskedelmi banki modellezése
      [Modelling the migration of commercial bank clients]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 915-934.

    More about this item

    Keywords

    Networks; International trade; Gravity model;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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