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Distance, production, and trade

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  • Don P. Clark
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    Abstract

    This paper investigates the relationship between geographical distance and both the extent of trade and foreign production. Industries engaged in exporting and co-production activities across national boundaries are identified through their use of the Offshore Assembly Provisions in the US tariff code. Findings counter conventional wisdom. Trade and foreign production activities are found to drop off rapidly over the first third of the distance scale, rise over the middle portion, reach a peak in the final third, and decline thereafter. This pattern suggests frictions associated with distance can be offset by government policies and other country attributes. Management control, information and communications costs, and the ability to implement just-in-time delivery strategies may not be as distance sensitive as previously thought. Theorists should re-evaluate the role of distance in trade models and refrain from using distance as a proxy for transport costs.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

    Volume (Year): 16 (2007)
    Issue (Month): 3 ()
    Pages: 359-371

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    Handle: RePEc:taf:jitecd:v:16:y:2007:i:3:p:359-371

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    Related research

    Keywords: Geographical distance; co-production activity; global sourcing;

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    Cited by:
    1. Inmaculada Martínez-Zarzoso & Gordon Wilmsmeier, 2010. "Freight Rates and the Margins of Intra-Latin American Maritime Trade," Ibero America Institute for Econ. Research (IAI) Discussion Papers 201, Ibero-America Institute for Economic Research.
    2. Coughlin, Cletus C., 2014. "Determinants of trade margins: insights using state export data," Working Papers 2014-6, Federal Reserve Bank of St. Louis.

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