The Distance Puzzle Revisited: A New Interpretation Based on Geographic Neutrality
AbstractOne of the best-established empirical results in international economics is that bilateral trade decreases with distance, despite the reductions in the costs of trade brought about by globalization. This working paper proposes an explanation to this apparent contradiction (labeled as the distance puzzle). It hinges on the concept of geographic neutrality, which is used to construct international trade integration indicators for two different scenarios, namely, when distance matters and when it does not. The results indicate that the importance of distance varies greatly across countries, as revealed by disparate gaps between distance-corrected and distance-uncorrected trade integration indicators for different countries. Some factors rooted in the literature explain away the discrepancies, but their importance varies according to the trade integration indicator considered-trade openness or trade connection.
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Bibliographic InfoPaper provided by Fundacion BBVA / BBVA Foundation in its series Working Papers with number 201019.
Date of creation: Dec 2009
Date of revision:
Geographic neutrality; globalization; gravity models; network analysis; remoteness.;
Other versions of this item:
- Arribas, Iván & Pérez, Francisco & Tortosa-Ausina, Emili, 2009. "The distance puzzle revisited: a new interpretation based on geographic neutrality," MPRA Paper 19170, University Library of Munich, Germany.
- F15 - International Economics - - Trade - - - Economic Integration
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
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