The International-Trade Network: Gravity Equations and Topological Properties

Details The International-Trade Network: Gravity Equations and Topological Properties The International-Trade Network: Gravity Equations and Topological Properties

2009-08-14

arxiv.org/abs/0908.2086v1

Economy

Quantitative Finance

General Finance

Scientific paper

This paper begins to explore the determinants of the topological properties of the international - trade network (ITN). We fit bilateral-trade flows using a standard gravity equation to build a "residual" ITN where trade-link weights are depurated from geographical distance, size, border effects, trade agreements, and so on. We then compare the topological properties of the original and residual ITNs. We find that the residual ITN displays, unlike the original one, marked signatures of a complex system, and is characterized by a very different topological architecture. Whereas the original ITN is geographically clustered and organized around a few large-sized hubs, the residual ITN displays many small-sized but trade-oriented countries that, independently of their geographical position, either play the role of local hubs or attract large and rich countries in relatively complex trade-interaction patterns.

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