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The Gravity of Globalization

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  • Diego Agudelo

    (EAFIT University)

  • Larry Davidson

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

Can changes in the trade of the world’s largest trading countries be considered more global? Or should they be labeled as more regional? We investigated these questions for the G7 countries for the time period from 1980 to 1997. We found that the usual dichotomy of global-regional is not rich enough to answer these questions because globalization can be measured in terms of both physical and cultural distance. Our new taxonomy allows for testing these separate impacts on world trade and suggests that trade changes are best described as regional, though with some qualification. With respect to physical distance, we find that trade is clearly becoming more regional. On the cultural dimension, however, we find conflicting results. These results are robust to a series of tests. We find the same pattern at industry level, except for Paper Products and Motor Vehicles. The regionalization pattern holds for both imports to and exports from the G7, but it is stronger for exports.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2006-15-agudelo-davidson.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-15.

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Date of creation: 2006
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Handle: RePEc:iuk:wpaper:2006-15

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  1. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  2. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
  3. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
  4. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
  5. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  6. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 437-466, May.
  7. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  8. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, 09.
  9. Alan M. Rugman & Alain Verbeke, 2004. "Regional Transnationals and Triad Strategy," Working Papers 2004-20, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  10. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, 02.
  11. T. Otsubo, Shigeru & Umemura, Tetsuo, 2003. "Forces Underlying Trade Integration in the APEC Region: A Gravity Model Analysis of Trade, FDI, and Complementarity," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 126-149.
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Cited by:
  1. Diego Agudelo & Galia Julieta Benitez & Larry Davidson, 2006. "A South American Perspective: Regional versus Global Trade Patterns," Working Papers 2006-16, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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