DP8240 The Network Structure of International Trade
|Publication Date:||February 2011|
|Keyword(s):||international trade, social networks|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8240|
I build a simple dynamic model of the formation of an international social network of importers and exporters. Firms can only export into markets in which they have a contact. They acquire new contacts both at random, and via their network of existing contacts. This model explains (i) the cross-sectional distribution of the number of foreign markets accessed by individual exporters, (ii) the cross-sectional geographic distribution of foreign contacts, and (iii) the dynamics of firm level exports. I show that the firm level dynamics of trade can explain the observed cross section of firm level exports. All theoretical predictions are supported by the data.