A Balls-and-Bins Model of Trade
AbstractMany of the facts about the extensive margin of trade—which firms export, and how many products are sent to how many destinations—are consistent with a surprisingly large class of trade models because of the sparse nature of trade data. We propose a statistical model to account for sparsity, formalizing the assignment of trade shipments to country, product, and firm categories as balls falling into bins. The balls-and-bins model quantitatively reproduces the pattern of zero product- and firm-level trade flows across export destinations, and the frequency of multiproduct, multidestination exporters. In contrast, balls-and-bins overpredicts the fraction of exporting firms.
CitationArmenter, Roc, and Miklós Koren. 2014. "A Balls-and-Bins Model of Trade." American Economic Review, 104 (7): 2127-51. DOI: 10.1257/aer.104.7.2127
- F11 Neoclassical Models of Trade
- F14 Empirical Studies of Trade