Spatial Constraints on Economic Interactions: A Complexity Approach to the Japanese Inter-Firm Trade Network

Eduardo Viegas (), Orr Levy, Shlomo Havlin, Hideki Takayasu and Misako Takayasu
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Eduardo Viegas: Department of Computer Science, School of Computing, Tokyo Institute of Technology, Yokohama 226-8502, Japan
Orr Levy: Department of Immunobiology, Yale University School of Medicine, New Haven, CT 06510, USA
Shlomo Havlin: Department of Computer Science, School of Computing, Tokyo Institute of Technology, Yokohama 226-8502, Japan
Hideki Takayasu: Department of Computer Science, School of Computing, Tokyo Institute of Technology, Yokohama 226-8502, Japan
Misako Takayasu: Department of Computer Science, School of Computing, Tokyo Institute of Technology, Yokohama 226-8502, Japan

Mathematics, 2024, vol. 12, issue 8, 1-25

Abstract: The trade distance is an important constraining factor underpinning the emergence of social and economic interactions of complex systems. However, agent-based studies supported by the granular analysis of distances are limited. Here, we present a complexity method that places the actual geographical locations of individual firms in Japan at the epicentre of our research. By combining methods derived from network science together with information theory measures, and by using a comprehensive dataset of Japanese inter-firm business transactions, we evaluate the effects of spatial features on the structural patterns of the economy. We find that the normalised probability distributions of the distances between interacting firms obey a power law like decay concomitant with the sizes of firms and regions. Furthermore, small firms would reach large distances to become customers of large firms, while trading between either only small firms or only large firms tends to be at smaller distances. Furthermore, a time evolution analysis suggests a reduction in the overall average trading distances in last 20 years. Lastly, our analysis concerning the trading dynamics among prefectures indicates that the preference to trade with neighbouring prefectures tends to be more pronounced at rural regions as opposed to the larger central conurbations.

Keywords: complexity; information theory; network science (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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