Gravity, log of gravity and the "distance puzzle"
AbstractEstimations of gravity equations specified in logarithm generally conclude that the distance elasticity of trade has increased over time despite globalization. In contrast, building on Santos Silva and Tenreyro (2006), this elasticity is estimated to have been stable around 0.65-0.70 since the 1960s. Moreover, although FTAs tend to cover neighboring countries, this main result is robust to different treatments of FTA effects. The main estimated change refers to the impact of colonial linkages, which has been at least halved. This paper brings also several important methodological contributions to the analysis of gravity equations, including broad support for the Poisson PML estimator.
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Date of creation: 03 Jul 2009
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distance puzzle ; gravity equations ; international trade ; pseudo-maximum likelihood methods;
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- Joao Santos Silva & Silvana Tenreyro, 2005.
"The Log of Gravity,"
CEP Discussion Papers
dp0701, Centre for Economic Performance, LSE.
- Lionel Fontagne & Soledad Zignago, 2007. "A Re-evaluation of the Impact of Regional Agreements on Trade Patterns," Economie Internationale, CEPII research center, issue 109, pages 31-51.
- Elizaveta Archanskaia & Guillaume Daudin, 2012.
"Heterogeneity and the Distance Puzzle,"
FIW Working Paper series
- Keith Head & Thierry Mayer, 2013. "What Separates Us? Sources of Resistance to Globalization," Working Papers 2013-26, CEPII research center.
- Yotov, Yoto V., 2012.
"A simple solution to the distance puzzle in international trade,"
Elsevier, vol. 117(3), pages 794-798.
- Yotov, Yoto, 2012. "A Simple Solution to the Distance Puzzle in International Trade," Department of Economics Working Paper Series 2012-6, LeBow College of Business, Drexel University.
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