The International-Trade Network: Gravity Equations and Topological Properties

TL;DR

This paper investigates the determinants of the international trade network's structure by removing geographic and economic factors, revealing an underlying complex system with diverse topological features.

Contribution

It introduces a residual trade network by filtering out standard factors, uncovering the intrinsic topological properties of international trade.

Findings

Residual ITN shows complex system signatures

Original ITN is geographically clustered with large hubs

Residual ITN has many small, trade-oriented countries

Abstract

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.