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Pecking Order and Core-Periphery in International Trade

Author

Listed:
  • K De Bruyne
  • Glenn Magerman
  • Jan Van Hove
Abstract
This paper analyzes the impact of market size and trade costs on bilateral trade flows. A multi-country trade model with firm-level heterogeneity in productivities and countries’market potential provides a simple micro foundation for the link between these variables. In the model, market size and trade costs jointly determine a country-specific pecking order of exporters serving their destination countries. In a hypothetical setting where bilateral trade costs are homogeneous across country pairs, market size then implies a common ranking of exporters among destination countries. This leads to a unique core-periphery structure of the world trade network. Relaxing the assumption of homogeneous trade costs, we illustratethe impact of market size and trade costs on bilateral trade flows and its margins in a simple gravity-like setting. Using an instrumental variables approach, we find that both market size and trade costs (measured through the network position of countries) have a significant impact on bilateral exports: countries in the core bilaterally trade more with other countries in the core than with peripheral countries, conditional on typical observables.

Suggested Citation

  • K De Bruyne & Glenn Magerman & Jan Van Hove, 2019. "Pecking Order and Core-Periphery in International Trade," Working Papers ECARES 2019-06, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/280986
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    References listed on IDEAS

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    Cited by:

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    2. Peng Peng & Jessie P. H. Poon & Xiaowei Xie, 2024. "COVID-19 Medical Trade: Multilayer Network Analysis and Network Determinants," Networks and Spatial Economics, Springer, vol. 24(1), pages 27-48, March.
    3. Storonyanska, Iryna & Patytska, Khrystyna & Hrynchyshyn, Iryna & Chemerys, Vasyl, 2020. "Spatial disproportions in development of territorial community under conditions of administrative and financial decentralization," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 6(4), December.
    4. Ovielt Baltodano L'opez & Roberto Casarin, 2022. "A Dynamic Stochastic Block Model for Multi-Layer Networks," Papers 2209.09354, arXiv.org.
    5. Suhua Ou & Qingshan Yang & Jian Liu, 2024. "The global production pattern of the semiconductor industry: an empirical research based on trade network," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-13, December.

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    More about this item

    Keywords

    D85; F1; L1.;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • F1 - International Economics - - Trade

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