Who buys what, where: Reconstruction of the international trade flows by commodity and industry

Abstract

We developed a model to reconstruct the international trade network by considering both commodities and industry sectors in order to study the effects of reduced trade costs. First, we estimated trade costs to reproduce WIOD and NBER-UN data. Using these costs, we estimated the trade costs of sector specific trade by types of commodities. We successfully reconstructed sector-specific trade for each types of commodities by maximizing the configuration entropy with the estimated costs. In WIOD, trade is actively conducted between the same industry sectors. On the other hand, in NBER-UN, trade is actively conducted between neighboring countries. This seems like a contradiction. We conducted community analysis for the reconstructed sector-specific trade network by type of commodities. The community analysis showed that products are actively traded among same industry sectors in neighboring countries. Therefore the observed features of the community structure for WIOD and NBER-UN are complementary.