2011/25 | LEM Working Paper Series | |
Modeling the International-Trade Network: A Gravity Approach |
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Marco Dueñas, Giorgio Fagiolo |
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Keywords | ||
International Trade Network; Gravity Equation; Weighted Network Analysis; Topological Properties; Econophysics.
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JEL Classifications | ||
F10, D85
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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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