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A GDP-driven model for the binary and weighted structure of the International Trade Network

Almog, Assaf and Squartini, Tiziano and Garlaschelli, Diego A GDP-driven model for the binary and weighted structure of the International Trade Network. New Journal of Physics, 17 (1). 013009. ISSN 1367-2630 (2015)

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Abstract

Recent events such as the global financial crisis have renewed the interest in the topic of economic networks. One of the main channels of shock propagation among countries is the International Trade Network (ITN). Two important models for the ITN structure, the classical gravity model of trade (more popular among economists) and the fitness model (more popular among networks scientists), are both limited to the characterization of only one representation of the ITN. The gravity model satisfactorily predicts the volume of trade between connected countries, but cannot reproduce the missing links (i.e. the topology). On the other hand, the fitness model can successfully replicate the topology of the ITN, but cannot predict the volumes. This paper tries to make an important step forward in the unification of those two frameworks, by proposing a new gross domestic product (GDP) driven model which can simultaneously reproduce the binary and the weighted properties of the ITN. Specifically, we adopt a maximum-entropy approach where both the degree and the strength of each node are preserved. We then identify strong nonlinear relationships between the GDP and the parameters of the model. This ultimately results in a weighted generalization of the fitness model of trade, where the GDP plays the role of a ‘macroeconomic fitness’ shaping the binary and the weighted structure of the ITN simultaneously. Our model mathematically explains an important asymmetry in the role of binary and weighted network properties, namely the fact that binary properties can be inferred without the knowledge of weighted ones, while the opposite is not true.

Item Type: Article
Identification Number: 10.1088/1367-2630/17/1/013009
Subjects: Q Science > QA Mathematics
Q Science > QC Physics
Research Area: Economics and Institutional Change
Depositing User: Caterina Tangheroni
Date Deposited: 05 Nov 2015 13:51
Last Modified: 05 Nov 2015 13:51
URI: http://eprints.imtlucca.it/id/eprint/2826

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