Working Paper: CEPR ID: DP8240
Authors: Thomas Chaney
Abstract: 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.
Keywords: International Trade; Social Networks
JEL Codes: D85; F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| network structure of international trade (F10) | cross-sectional distribution of the number of foreign markets accessed by individual exporters (F10) |
| more contacts (Y50) | more market entries (L17) |
| geographic distribution of foreign contacts (F29) | geographic dispersion of exports (F10) |
| aggregate trade flows between countries (F10) | likelihood of a firm entering a new market (M13) |
| existing contacts (Y80) | entry into new markets (L17) |