A model of global trade

Months of blood, sweat and tears (or rather, those all-too modern equivalents coffee, RSI and eye-strain) have been spilled in the last six months. I have an absolutely non-existent ability to concentrate on more than one thing at a time, and the one thing I’ve been thinking, dreaming and going on about non-stop for pretty much all that time reached fruition late last night.

This is the first ever output from what we’re calling a ‘Global Demonstration Model’:

Modelled trade flows and economy shapes for the three countries, based on 2008 input-output data and 2010 trade data
Modelled trade flows and economy shapes for the three countries, based on 2008 input-output data and 2010 trade data

The picture above doesn’t really make much sense yet, in that it’s pretty hard to tell what’s going on and some of the colours are repeated, but it gives you a sense of the sheer magnitude of the model I’ve been building. It shows the economies of India, the UK and the US and the trade flows between them. The economy shapes are from 2008, and the trade flows are from 2010.

There’s a proper paper coming out soon (as if I were an actual academic) but before then, and for the reader who has no interest in reading a literature review, here’s an sketch of the Global Demonstration Model in human-readable terms:

  • Countries are represented by data on the shape of their economies, as split into economic sectors by the World Input-Output Database.
  • Trade between countries is modelled from actual trade data from the UN.
  • Countries are assumed to trade with one another in fixed proportions; for example, the UK gets around 12% of its agricultural imports from the Netherlands. This percentage then remains fixed when exploring the model. (Since you ask, the 12% is mostly tomatoes, flowers, onions, peppers and cucumbers.)
  • Each sector is imported in a fixed amount in each country. For example, the US only imports 11% of its total fuel requirements, against the UK’s 45%. These ratios also don’t change.

These assumptions allow us to ‘mess about’ with the world as we see it today, and test how sensitive the global economy is to particular changes, or how the world might have looked if trade patterns had been different.

And this is just the beginning: we’re going to be putting several more social science models around this trade-based core to model the effects of, for example, migration on the global economy.

I’ll be working on the diagram to make it (a) more readable, and (b) more interactive, and we’ll be producing some interesting analysis based on the model pretty soon.

Watch this space…

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Author: Rob Levy

Economist at NEF. Former teaching Fellow in Economics at UCL and Bristol University. Recently submitted my PhD. We'll see what happens...

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