The Pattern of Bilateral Trade

This figure illustrates the pattern of trade by plotting bilateral trade shares for 1996 as a surface. For an exporter-importer pair, the z-axis plots the fraction of goods the importer purchases from the exporter. Exporters and importers are sorted by income per-worker data, so the U.S. is country number one, OECD countries comprise about 1-20, China and India are countries 59 and 60.

The large ridge or  “mountains” down the diagonal illustrates home bias---most countries purchase a majority of goods from home. The the smaller mountains to the to the left of the diagonal illustrate that most countries import a decent fraction of goods from rich countries, i.e. exporter countries 1-20. The “plains” to the right of the diagonal illustrate poor countries export little to anyone. An exception is a small ridge, corresponding with countries 59 and 60, reflecting China and India’s sizeable role in international trade.

Here is a movie from my talk at the SED meetings showing how the calibrated pattern of trade changes as trade costs are reduced from my paper International Trade and Income Differences.