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Have Developed Countries Escaped the Curse of Distance?

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  • Hervé Boulhol
  • Alain de Serres

Abstract

There is widespread evidence that a better access to markets contributes to raising income levels. However, no quantification of the impact of distance to markets has been made on the basis of a sample restricted to advanced — and therefore more homogeneous — countries. This paper applies the framework developed by Redding and Venables (2004) on a panel data covering 21 OECD countries over 1970-2004, and shows that, relative to the average OECD country, the cost of remoteness for countries such as Australia and New Zealand could be as high as 10% of GDP. Conversely, the benefit for centrally-located countries like Belgium and the Netherlands could be around 6-7%. Second, the paper explains why the key estimated parameter in the Redding-Venables model is biased upwards in cross-section samples that mix both developing and developed countries, because of the inability to adequately control for heterogeneity in technology levels across countries. The paper also provides a detailed discussion of the links between the ?death-of-distance? hypothesis, the evolution of transport costs and that of the elasticity of trade to distance. Les pays développés ont-ils échappé à la malédiction de la distance ? De nombreuses études empiriques ont montré qu‘un meilleur accès aux marchés contribue à augmenter les revenus. Cependant, aucune quantification de l‘impact de la distance aux marchés n‘a été effectuée à partir d‘un échantillon homogène limité aux pays développés. Ce papier applique le cadre développé par Redding and Venables (2004) à des données de panel couvrant 21 pays de l‘OCDE entre 1970 et 2004, et montre que, relativement à la moyenne des pays de l‘OCDE, le coût de l‘éloignement géographique pour des pays comme l‘Australie et la Nouvelle Zélande s‘élève à environ 10% de PIB. Réciproquement, le bénéfice que tirent les pays ayant une position centrale comme la Belgique et les Pays-Bas serait de l‘ordre de 6-7%. Deuxièmement, cette étude explique pourquoi le paramètre-clé dans le modèle Redding-Venables est biaisé à la hausse dans des échantillons en coupe qui mêlent pays développés et en développement, en raison de l‘incapacité à contrôler l‘hétérogénéité des niveaux technologiques entre pays. Le papier propose également une discussion détaillée des liens entre l‘hypothèse de la « fin de la distance », l‘évolution des coûts de transport et celle de l‘élasticité du commerce à la distance.

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File URL: http://dx.doi.org/10.1787/241705110254
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 610.

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Date of creation: 15 May 2008
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Handle: RePEc:oec:ecoaaa:610-en

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Related research

Keywords: market access; economic geography; distance; transport costs; coûts de transport; accès aux marchés; distance; économie géographique;

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Cited by:
  1. Yotov, Yoto, 2012. "A Simple Solution to the Distance Puzzle in International Trade," School of Economics Working Paper Series 2012-6, LeBow College of Business, Drexel University.
  2. Rafal Kierzenkowski, 2009. "The Challenge of Restoring French Competitiveness," OECD Economics Department Working Papers 720, OECD Publishing.
  3. Shekhar Aiyar & Romain A Duval & Damien Puy & Yiqun Wu & Longmei Zhang, 2013. "Growth Slowdowns and the Middle-Income Trap," IMF Working Papers 13/71, International Monetary Fund.
  4. Jordan Schwartz & José Luis Guasch & Gordon Wilmsmeier, 2009. "Logistics, Transport and Food Prices in LAC: Policy Guidance for Improving Efficiency and Reducing Costs," IDB Publications 9324, Inter-American Development Bank.

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