Chapter 3An Interdependent Multi-layer Model for Trade

Simone Caschili, Francesca Medda and Alan Wilson

3.1 Introduction

We saw in the previous chapter how the international trade system is made up of a number of interdependent networks. We now aim to model this system by articulating the horizontal and vertical connections in these networks to generate what we call the Interdependent Multi-layer Model (IMM). The IMM allows us to estimate bilateral trade flows between countries (imports and exports). This model has a range of uses and in particular allows us to investigate the effects of exogenous shocks in the system.

Natural disasters such as Hurricane Katrina and the 2011 earthquake in Japan underline how our cities, regions and nations are composed of complex interdependent systems (Akhtar and Santos 2013; Burns and Slovic, 2012; Levin et al., 1998). We are especially interested in the consequences for trade and whether we can evaluate the ability of systems to recover after a disruption? What can we learn about their resilience capacity in order to design better and more reliable economic systems?

Recent advances in complexity science have facilitated such investigations into resilience to disruptive exogenous and endogenous events (Marincioni et al., 2013; Liu et al., 2007, Holt et al., 2011; Markose, 2005; Rosser, 1999). For example, global supply chains are characterised by interrelated organisations, resources and processes that create and deliver products and services ...

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