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The Missing Globalization Puzzle

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  • Rikhil Bhavnani
  • Natalia T. Tamirisa
  • Arvind Subramanian
  • David T. Coe

Abstract

The failure of declining trade-related costs to be reflected in estimates of the standard gravity model of bilateral trade might be called the "missing globalization puzzle." This puzzle is most apparent in the estimated distance coefficients found in the literature, which show no evidence of declining in absolute value over time. In contrast, we find evidence of globalization, on both cross-section and panel data, reflected in a variety of measures of geography. Our estimation procedure is consistent with recent theoretical developments that emphasize the importance of relative costs for determining bilateral trade patterns. But the main reason our findings differ from previous studies is our nonlinear specification, which has a number of advantages over the standard log-linear specification.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/171.

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Length: 30
Date of creation: 01 Oct 2002
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Handle: RePEc:imf:imfwpa:02/171

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  1. James E. Anderson & Douglas Marcouiller, S.J., 1999. "Insecurity and the Pattern of Trade: An Empirical Investigation," Boston College Working Papers in Economics, Boston College Department of Economics 418, Boston College Department of Economics, revised 03 Aug 2000.
  2. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics, Boston College Department of Economics 485, Boston College Department of Economics.
  3. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 72, July.
  4. Jean-François BRUN & Céline CARRERE & Patrick GUILLAUMONT & Jaime MELO DE, 2002. "Has Distance Died? Evidence from a Panel Gravity Model," Working Papers 200215, CERDI.
  5. Leamer, E. & Levingsohn, J., 1994. "International Trade Theory: The Evidence," Working Papers, Research Seminar in International Economics, University of Michigan 368, Research Seminar in International Economics, University of Michigan.
  6. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers, Michigan - Center for Research on Economic & Social Theory 95-05, Michigan - Center for Research on Economic & Social Theory.
  8. David T. Coe & Alexander W. Hoffmaister, 1998. "North-South Trade-Is Africa Unusual?," IMF Working Papers 98/94, International Monetary Fund.
  9. Wang, Z.K. & Winters, L.A., 1992. "The Trading Potential of Eastern Europe," Discussion Papers, Department of Economics, University of Birmingham 92-21, Department of Economics, University of Birmingham.
  10. Jeffrey A. Frankel & Shang-Jin Wei, 1998. "Regionalization of World Trade and Currencies: Economics and Politics," NBER Chapters, National Bureau of Economic Research, Inc, in: The Regionalization of the World Economy, pages 189-226 National Bureau of Economic Research, Inc.
  11. Soloaga, Isidro & Winters, L. Alan, 1999. "Regionalism in the Nineties: What Effect on Trade?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2183, C.E.P.R. Discussion Papers.
  12. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  13. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," International Trade, EconWPA 0012003, EconWPA.
  14. Arvind Subramanian & Natalia T. Tamirisa, 2003. "Is Africa Integrated in the Global Economy?," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 2.
  15. Greene, William H, 1981. "On the Asymptotic Bias of the Ordinary Least Squares Estimator of the Tobit Model," Econometrica, Econometric Society, Econometric Society, vol. 49(2), pages 505-13, March.
  16. Jeffrey A. Frankel & Andrew K. Rose, 2000. "Estimating the Effect of Currency Unions on Trade and Output," NBER Working Papers 7857, National Bureau of Economic Research, Inc.
  17. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  18. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
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