American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Balls-and-Bins Model of Trade
American Economic Review
vol. 104,
no. 7, July 2014
(pp. 2127–51)
Abstract
Many 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.Citation
Armenter, Roc, and Miklós Koren. 2014. "A Balls-and-Bins Model of Trade." American Economic Review, 104 (7): 2127–51. DOI: 10.1257/aer.104.7.2127Additional Materials
JEL Classification
- F11 Neoclassical Models of Trade
- F14 Empirical Studies of Trade