The Network Structure of International Trade
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.
I am grateful to Enghin Atalay, Sylvain Chassang, Xavier Gabaix, Sam Kortum, Pierre-Louis Lions, Bob Lucas, Marc Melitz, Roger Myerson, David Sraer, and seminar participants at Chicago (Math and Econ), Columbia, Harvard, MIT, the NBER Summer Institute, NYU, Princeton, Sciences Po (Paris), Toronto, the Toulouse School of Economics, UQAM, UW Milwaukee, Wharton and Yale for helpful discussions. I am indebted to Ferdinando Monte and Enghin Atalay for their superb research assistance. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.