2011/25 LEM Working Paper Series

Modeling the International-Trade Network: A Gravity Approach

Marco Dueñas, Giorgio Fagiolo
International Trade Network; Gravity Equation; Weighted Network Analysis; Topological Properties; Econophysics.

  JEL Classifications
F10, D85

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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