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How Links are Formed According to the Distance in Transaction Network of 800,000 Firms

Tomohiko Konno

Princeton University

November 2, 2008

In International Economics, so-called gravity equation has been successful. In the present paper, we show that similar equation concerning transaction network holds well. The weight of transaction network among Japanese prefectures is explained by Sales-i*Sales-j/Distance-ij very well. The definitions of terms are as follows. Sales-i is the total sales of all the firms in prefecture-i. Distance-ij is the physical distance between prefecture i and j. Weight-ij is the number of transaction links between all the firms in prefecture-i and all the firms in prefecture-j.

We also obtain power parameters of Sales and Distance. They are very close to 1 and -1. The estimated power parameters as well are in excellent agreement with the network gravity equation.

For this purpose we used Japanese firms' transaction network data which consists of 800,000 firms.

Number of Pages in PDF File: 9

Keywords: Transaction Network, Gravity Equation, Geography, Network

JEL Classification: R3, R4, L14, L16

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Date posted: November 4, 2008 ; Last revised: October 19, 2012

Suggested Citation

Konno, Tomohiko, How Links are Formed According to the Distance in Transaction Network of 800,000 Firms (November 2, 2008). Available at SSRN: http://ssrn.com/abstract=1294065 or http://dx.doi.org/10.2139/ssrn.1294065

Contact Information

Tomohiko Konno (Contact Author)
Princeton University ( email )
22 Chambers Street
Princeton, NJ 08544
United States
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