A Balls-and-Bins Model of Trade

Roc Armenter and Miklós Koren

October 2013

Abstract

Many of the facts about the extensive margin of trade---which firms export, and how many products 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 multi-product, multi-destination exporters. In contrast, balls-and-bins overpredicts the fraction of exporting firms.

Please cite as

Roc Armenter and Miklós Koren, 2014. “A Balls-and-Bins Model of Trade.” American Economic Review. 104(7), pp. 2127-2151. bib

Resources

  1. Full text
  2. Online appendix
  3. Replication data and code
  4. A comment by Blum, Claro and Horstmann (2015)
  5. Our reply to Blum, Claro and Horstmann (2015)