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Stochastic Trade Networks

Massimo Riccaboni () and Stefano Schiavo

No 1/2013, Working Papers from IMT School for Advanced Studies Lucca

Abstract: This paper develops a simple network model to describe the dynamic of the intensive and extensive margin of international trade flows. The result is achieved by means of the combination of two mechanisms of proportional growth: the first (discrete) determines the formation of trade links, the second (continuous) governs trade intensity. We show that our setup is able to simultaneously match a large number of empirical regularities, such as the fraction of zero trade flows across pairs of countries or the high concentration of trade with respect to both products and destinations. Our findings suggest that stylized facts are strongly interconnected across different levels of aggregation of trade data , so that a unifying explanation is called for. By incorporating stochastic elements into standard trade models we can improve their ability to explain relevant facts about world trade.

Keywords: international trade; networks; preferential attachment; urn models; proportionate growth (search for similar items in EconPapers)
JEL-codes: F14 F43 O25 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2013-01, Revised 2013-01
New Economics Papers: this item is included in nep-int and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in EIC working paper series

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http://eprints.imtlucca.it/1461/1/EIC_WP_1_2013.pdf First version, 2013 (application/pdf)

Related works:
Working Paper: Stochastic Trade Networks (2012) Downloads
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