?url_ver=Z39.88-2004&rft_id=arXiv%3A1506.00348&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.relation=http%3A%2F%2Feprints.imtlucca.it%2F4039%2F&rft.title=Enhanced+Gravity+Model+of+trade%3A+reconciling+macroeconomic+and+network+models&rft.creator=Almog%2C+Assaf&rft.creator=Bird%2C+Rhys&rft.creator=Garlaschelli%2C+Diego&rft.subject=QC+Physics&rft.description=The+structure+of+the+International+Trade+Network+(ITN)%2C+whose+nodes+and+links+represent+world+countries+and+their+trade+relations+respectively%2C+affects+key+economic+processes+worldwide%2C+including+globalization%2C+economic+integration%2C+industrial+production%2C+and+the+propagation+of+shocks+and+instabilities.+Characterizing+the+ITN+via+a+simple+yet+accurate+model+is+an+open+problem.+The+traditional+Gravity+Model+successfully+reproduces+the+volume+of+trade+between+connected+countries%2C+using+macroeconomic+properties+such+as+GDP%2C+geographic+distance%2C+and+possibly+other+factors.+However%2C+it+predicts+a+network+with+complete+or+homogeneous+topology%2C+thus+failing+to+reproduce+the+highly+heterogeneous+structure+of+the+ITN.+On+the+other+hand%2C+recent+maximum-entropy+network+models+successfully+reproduce+the+complex+topology+of+the+ITN%2C+but+provide+no+information+about+trade+volumes.+Here+we+integrate+these+two+currently+incompatible+approaches+via+the+introduction+of+an+Enhanced+Gravity+Model+(EGM)+of+trade.+The+EGM+is+the+simplest+model+combining+the+Gravity+Model+with+the+network+approach+within+a+maximum-entropy+framework.+Via+a+unified+and+principled+mechanism+that+is+transparent+enough+to+be+generalized+to+any+economic+network%2C+the+EGM+provides+a+new+econometric+framework+wherein+trade+probabilities+and+trade+volumes+can+be+separately+controlled+by+any+combination+of+dyadic+and+country-specific+macroeconomic+variables.+The+model+successfully+reproduces+both+the+global+topology+and+the+local+link+weights+of+the+ITN%2C+parsimoniously+reconciling+the+conflicting+approaches.+It+also+indicates+that+the+probability+that+any+two+countries+trade+a+certain+volume+should+follow+a+geometric+or+exponential+distribution+with+an+additional+point+mass+at+zero+volume.&rft.publisher=arXiv&rft.date=2017&rft.type=Working+Paper&rft.type=NonPeerReviewed&rft.format=application%2Fpdf&rft.language=en&rft.rights=cc_by_nc&rft.identifier=http%3A%2F%2Feprints.imtlucca.it%2F4039%2F1%2F1506.00348.pdf&rft.identifier=++Almog%2C+Assaf+and+Bird%2C+Rhys+and+Garlaschelli%2C+Diego++Enhanced+Gravity+Model+of+trade%3A+reconciling+macroeconomic+and+network+models.++Working+Paper+++arXiv+++++++(Submitted)+++&rft.relation=http%3A%2F%2Farxiv.org%2Fpdf%2F1506.00348&rft.relation=arXiv%3A1506.00348