INTERNATIONAL TRADE NETWORK AND THE GRAVITY MODEL

Abstract

In this paper, we analyze the effects of geographical characteristics and trade network positions of the countries on the international trade. For this purpose, we employ a gravity model of international trade and combine gravity, network, and trade datasets for the years between 1995 and 2010. We use country-specific properties such as GDP, population, and other geographical variables for the countries in this study. Besides, we also divide the data into developed and developing countries to analyze the differences among countries in terms of economic development. Apart from explanatory variables which are country-specific properties, we utilize network variables such as degree, strength, closeness, and eigenvector. Our findings show that the network variables positively and significantly affect bilateral trade. Since these variables are related with the position of the countries in the network, we conclude that countries having central role in international trade network involve in higher trade volumes.