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Death of distance and the distance puzzle

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  • Lin, Faqin
  • Sim, Nicholas C.S.

Abstract

Despite the onset of globalization, year-by-year cross-country regressions of the gravity model usually suggest that the impediment of geographical distance on bilateral trade is rising, and not declining, over time. This effect of distance is dubbed the distance puzzle. In this paper, we argue that prima facie evidence of the distance effect from the year-by-year regressions may not be a good indicator of the true impact of distance on trade.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176512000912
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 116 (2012)
Issue (Month): 2 ()
Pages: 225-228

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Handle: RePEc:eee:ecolet:v:116:y:2012:i:2:p:225-228

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Distance puzzle; Year-by-year regression; Extensive margin; Intensive margin;

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References

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  1. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
  2. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2004. "The distance puzzle: on the interpretation of the distance coefficient in gravity equations," Economics Letters, Elsevier, vol. 83(3), pages 293-298, June.
  3. Edward E. Leamer & James Levinsohn, 1994. "International Trade Theory: The Evidence," NBER Working Papers 4940, National Bureau of Economic Research, Inc.
  4. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  5. Céline CARRERE & Maurice SCHIFF, 2004. "On the Geography of Trade: Distance is Alive and Well," Working Papers 200423, CERDI.
  6. Thierry Mayer, 2008. "Market Potential and Development," Sciences Po publications 6798, Sciences Po.
  7. Jacks, David S., 2009. "On the death of distance and borders: Evidence from the nineteenth century," Economics Letters, Elsevier, vol. 105(3), pages 230-233, December.
  8. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  9. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  10. Berthelon, Matias & Freund, Caroline, 2004. "On the conservation of distance in international trade," Policy Research Working Paper Series 3293, The World Bank.
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Citations

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Cited by:
  1. Bassem Kahouli & Anis Omri & Anissa Chaibi, 2014. "Environmental Regulations, Trade, and Foreign Direct Investment: Evidence from Gravity Equations," Working Papers 2014-189, Department of Research, Ipag Business School.
  2. Yotov, Yoto, 2012. "A Simple Solution to the Distance Puzzle in International Trade," School of Economics Working Paper Series 2012-6, LeBow College of Business, Drexel University.
  3. Chiarucci, Riccardo & Ruzzenenti, Franco & Loffredo, Maria I., 2014. "Detecting spatial homogeneity in the World Trade Web with Detrended Fluctuation Analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 1-7.
  4. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2013. "The Distance Effects on the Intensive and Extensive Margins of Trade Over Time," Discussion Papers Series 488, School of Economics, University of Queensland, Australia.
  5. Riccardo Chiarucci & Franco Ruzzenenti & Maria I. Loffredo, 2013. "Detecting spatial homogeneity in the world trade web with Detrended Fluctuation Analysis," Papers 1308.0526, arXiv.org, revised Nov 2013.
  6. Lin, Faqin, 2013. "Are distance effects really a puzzle?," Economic Modelling, Elsevier, vol. 31(C), pages 684-689.

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