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Stochastic Trade Networks

Riccaboni, Massimo and Schiavo, Stefano Stochastic Trade Networks. EIC working paper series #1/2013 IMT Institute for Advanced Studies Lucca ISSN 2279-6894.

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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.

Item Type: Working Paper (EIC working paper series)
Funders: Financial support received through the research project ‘The international trade network: empirical analyses and theoretical models’
Uncontrolled Keywords: JEL Codes: F14, F43, O25
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Research Area: Economics and Institutional Change
Depositing User: Ms T. Iannizzi
Date Deposited: 22 Jan 2013 15:35
Last Modified: 22 Jan 2013 15:52
URI: http://eprints.imtlucca.it/id/eprint/1461

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