2014/06 | LEM Working Paper Series | |
Intensive and extensive biases in economic networks: reconstructing world trade |
||
Rossana Mastrandrea, Tiziano Squartini, Giorgio Fagiolo, Diego Garlaschelli |
||
Keywords | ||
Network reconstruction, null models, Maximum Entropy ensembles, Complex networks, World Trade Web, trade margins
|
||
JEL Classifications | ||
|
||
Abstract | ||
In economic and financial networks, the strength (total value of the
connections) of a given node has always an important economic meaning,
such as the size of supply and demand, import and export, or financial
exposure. Constructing null models of networks matching the observed
strengths of all nodes is crucial in order to either detect
interesting deviations of an empirical network from economically
meaningful benchmarks or reconstruct the most likely structure of an
economic network when the latter is unknown. However, several studies
have proved that real economic networks are topologically very
different from networks inferred only from node strengths. Here we
provide a detailed analysis for the World Trade Web (WTW) by comparing
it to an enhanced null model that simultaneously reproduces the
strength and the number of connections of each node. We study several
temporal snapshots and different aggregation levels (commodity
classes) of the WTW and systematically find that the observed
properties are extremely well reproduced by our model. This allows us
to introduce the concept of extensive and intensive bias, defined as a
measurable tendency of the network to prefer either the formation of
new links or the reinforcement of existing ones. We discuss the
possible economic interpretation in terms of trade margins.
| ||
Downloads | ||
|
||
Back |