This proposal seeks to investigate the resiliency of Qatar’s trade network using state-of-the-art theoretical and empirical tools from economics. Using the United Nations’ Comtrade Database, we will analyze over 90 million trade flow observations covering over 5,000 product categories and nearly all importer-exporter country pairs over the period 2002-2015. We will calculate the Herfindahl-Hirschman Index (HHI) as a measure of market concentration to detect products for which Qatar’s supply chain is potentially under-diversified. This will highlight products that Qatar may want to think about developing alternative international and domestic sources for. On the theoretical side, the HHI only tells us how concentrated Qatar’s trade network is; therefore, it does not tell us what the impact on Qatar’s economy would be if the current trade network were to be disrupted. To predict the potential impact of trade disruptions on Qatar’s economy, we will develop a multi-product multi-region model of trade which we will then calibrate to match Qatar’s trade flows in 2015 by estimating transportation costs for each trade linkage and by estimating trade elasticities for each product (how much trade flows will respond to a 1% change in transportation costs). We can use our model to perform counterfactual experiments, whereby we eliminate potential trade linkages by setting transportation costs equal to infinity for those linkages. Our model will be able to capture both changes in the overall levels of trade flows as well as the redistribution of trade flows across remaining linkages. Our model will also give us welfare predictions for how damaging losing a given trade linkage would be to Qatar’s economy. We will use our model to simulate the 2017 crisis and blockade of Qatar by neighboring countries and compare the predictions of our model to Qatar’s response to the crisis, in order to qualitatively evaluate the performance of our model. After understanding where our model performs well and where it performs less well, we will simulate a large number of hypothetical trade crises in order to identify potential risks in Qatar’s networks and to evaluate it’s overall resiliency.
UREP cycle: 23
Faculty Mentor(s): Dr. Jack Rossbach
Student(s): Alisha Kamran, Halak Sheth