Network dependence in multi-indexed data on international trade flows
Manfred Fischer () and
James LeSage ()
No 2020/01, Working Papers in Regional Science from WU Vienna University of Economics and Business
Faced with the problem that conventional multidimensional fixed effects models only focus on unobserved heterogeneity, but ignore any potential cross-sectional dependence due to network interactions, we introduce a model of trade flows between countries over time that allows for network dependence in flows, based on sociocultural connectivity structures. We show that conventional multidimensional fixed effects model specifications exhibit cross-sectional dependence between countries that should be modeled to avoid simultaneity bias. Given that the source of network interaction is unknown, we propose a panel gravity model that examines multiplenetwork interaction structures, using Bayesian model probabilities to determine those most consistent with the sample data. This is accomplished with the use of computationally efficient Markov Chain Monte Carlo estimation methods that produce a Monte Carlo integration estimate of the log-marginal likelihood that can be used for model comparison. Application of the model to a panel of trade flows points to network spillover effects, suggesting the presence of network dependence and biased estimates from conventional trade flow specifications. The most important sources of network dependence were found to be membership in trade organizations, historical colonial ties, common currency, and spatial proximity of countries.
Keywords: origin-destination panel data fows; cross-sectional dependence; MCMC estimation; log-marginal likelihood; gravity models of trade; sociocultural distance (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm, nep-geo, nep-int and nep-net
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://epub.wu.ac.at/7534/ original version (application/pdf)
Journal Article: Network dependence in multi-indexed data on international trade flows (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wiw:wus046:7534
Access Statistics for this paper
More papers in Working Papers in Regional Science from WU Vienna University of Economics and Business Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by WU Library ().