A Topological Analysis of Trade Distance: Evidence from the Gravity Model and Complex Flow Networks

Abstract

As a classical trade model, the gravity model plays an important role in the trade policy-making process. However, the effect of physical distance fails to capture the effects of globalization and even ignores the multilateral resistance of trade. Here, we propose a general model describing the effective distance of trade according to multilateral trade paths information and the structure of the trade flow network. Quantifying effective trade distance aims to identify the hidden resistance information from trade networks data, and then describe trade barriers. The results show that flow distance, hybrid by multi-path constraint, and international trade network contribute to the forecasting of trade flows. Meanwhile, we also analyze the role of flow distance in international trade from two perspectives of network science and econometric model. At the econometric model level, flow distance can collapse to the predicting results of geographic distance in the proper time lagging variable, which can also reflect that flow distance contains geographical factors. At the international trade network level, community structure detection by flow distances and flow space embedding instructed that the formation of international trade networks is the tradeoff of international specialization in the trade value chain and geographical aggregation. The methodology and results can be generalized to the study of all kinds of product trade systems.

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