IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwedp/201569.html
   My bibliography  Save this paper

Distance and border effects in international trade: A comparison of estimation methods

Author

Listed:
  • Magerman, Glenn
  • Studnicka, Zuzanna
  • Van Hove, Jan

Abstract

This paper compares various estimation techniques used to determine the impact of distance and borders on international trade. The results consistently confirm the significantly negative distance effect, while the border effect, measured by evaluating whether intra-continental trade exceeds inter-continental trade, appears to be ambiguous and dependent on the estimation method. In addition, also the size of both effects varies substantially across estimation methods. Finally, the authors generally find that the estimations are in line with the respective weighting schemes of each estimation method.

Suggested Citation

  • Magerman, Glenn & Studnicka, Zuzanna & Van Hove, Jan, 2015. "Distance and border effects in international trade: A comparison of estimation methods," Economics Discussion Papers 2015-69, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201569
    as

    Download full text from publisher

    File URL: http://www.economics-ejournal.org/economics/discussionpapers/2015-69
    Download Restriction: no
    File URL: https://www.econstor.eu/bitstream/10419/125169/1/844410306.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
    2. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
    3. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    4. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    6. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
    7. Novy, Dennis, 2013. "International trade without CES: Estimating translog gravity," Journal of International Economics, Elsevier, vol. 89(2), pages 271-282.
    8. Cletus C. Coughlin & Dennis Novy, 2013. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from US Trade," CESifo Economic Studies, CESifo Group, vol. 59(2), pages 249-276, June.
    9. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    10. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2014. "Panel Data Gravity Models of International Trade," CESifo Working Paper Series 4616, CESifo.
    11. Jeffrey A. Frankel, 1997. "Sterilization of money inflows: Difficult (Calvo) or Easy (Reisen)?," Estudios de Economia, University of Chile, Department of Economics, vol. 24(2 Year 19), pages 263-285, December.
    12. Alberto Behar & Benjamin D. Nelson, 2014. "Trade Flows, Multilateral Resistance, and Firm Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 96(3), pages 538-549, July.
    13. Robinson, P M, 1987. "Asymptotically Efficient Estimation in the Presence of Heteroskedasticity of Unknown Form," Econometrica, Econometric Society, vol. 55(4), pages 875-891, July.
    14. Clément Bosquet & Hervé Boulhol, 2014. "Applying the GLM Variance Assumption to Overcome the Scale-Dependence of the Negative Binomial QGPML Estimator," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 772-784, October.
    15. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, July.
    16. Alberto Behar & Anthony J. Venables, 2011. "Transport Costs and International Trade," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 5, Edward Elgar Publishing.
    17. Berthelon, Matias & Freund, Caroline, 2008. "On the conservation of distance in international trade," Journal of International Economics, Elsevier, vol. 75(2), pages 310-320, July.
    18. Alan V. Deardorff, 2011. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," World Scientific Book Chapters, in: Robert M Stern (ed.), Comparative Advantage, Growth, And The Gains From Trade And Globalization A Festschrift in Honor of Alan V Deardorff, chapter 24, pages 267-293, World Scientific Publishing Co. Pte. Ltd..
    19. Jean-François Brun & Céline Carrère & Patrick Guillaumont & Jaime de Melo, 2015. "Has Distance Died? Evidence from a Panel Gravity Model," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 13, pages 299-320, World Scientific Publishing Co. Pte. Ltd..
    20. Blum, Bernardo S. & Goldfarb, Avi, 2006. "Does the internet defy the law of gravity?," Journal of International Economics, Elsevier, vol. 70(2), pages 384-405, December.
    21. Soloaga, Isidro & Alan Wintersb, L., 2001. "Regionalism in the nineties: what effect on trade?," The North American Journal of Economics and Finance, Elsevier, vol. 12(1), pages 1-29, March.
    22. Ben S. Bernanke & Kenneth S. Rogoff (ed.), 2001. "NBER Macroeconomics Annual 2000," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262523140, December.
    23. Russell Hillberry & David Hummels, 2003. "Intranational Home Bias: Some Explanations," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1089-1092, November.
    24. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    25. Barry Eichengreen & Douglas A. Irwin, 1998. "The Role of History in Bilateral Trade Flows," NBER Chapters, in: The Regionalization of the World Economy, pages 33-62, National Bureau of Economic Research, Inc.
    26. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
    27. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-153, February.
    28. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    29. Leamer, Edward E., 1993. "U.S. manufacturing and an emerging Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 4(1), pages 51-89.
    30. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    31. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
    32. Ben S. Bernanke & Kenneth Rogoff, 2001. "NBER Macroeconomics Annual 2000, Volume 15," NBER Books, National Bureau of Economic Research, Inc, number bern01-1, July.
    33. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-1229, December.
    34. Peter Egger & Kevin Staub, 2016. "GLM estimation of trade gravity models with fixed effects," Empirical Economics, Springer, vol. 50(1), pages 137-175, February.
    35. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
    36. Clément Bosquet & Hervé Boulhol, 2014. "Applying the GLM Variance Assumption to Overcome the Scale-Dependence of the Negative Binomial QGPML Estimator," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 772-784, October.
    37. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    38. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 441-487.
    39. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1, July.
    40. Jeffrey A. Frankel & Shang-Jin Wei, 1993. "A Pacific economic bloc: is there such an animal?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue nov12.
    41. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Applications to Poisson Models," Econometrica, Econometric Society, vol. 52(3), pages 701-720, May.
    42. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    43. John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 507-522, August.
    44. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    45. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    46. Edward E. Leamer, 2007. "A Flat World, a Level Playing Field, a Small World After All, or None of the Above? A Review of Thomas L Friedman's The World is Flat," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 83-126, March.
    47. David T Coe & Arvind Subramanian & Natalia T Tamirisa, 2007. "The Missing Globalization Puzzle: Evidence of the Declining Importance of Distance," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 34-58, May.
    48. Gopinath, G. & Helpman, . & Rogoff, K. (ed.), 2014. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 4, number 4.
    49. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    50. repec:lmu:muenar:20646 is not listed on IDEAS
    51. John F. Helliwell, 1997. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
    52. Mark N. Harris & Weiping Kostenko & László Mátyás & Isfaaq Timol, 2009. "The Robustness Of Estimators For Dynamic Panel Data Models To Misspecification," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(03), pages 399-426.
    53. Clément Bosquet & Hervé Boulhol, 2014. "Applying the GLM Variance Assumption to Overcome the Scale-Dependence of the Negative Binomial QGPML Estimator," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 772-784, October.
    54. Harris, M.N. & Matyas, L., 1996. "A Comparative Analysis of Different Estimatiors for Dynamic Panel data Models," Monash Econometrics and Business Statistics Working Papers 4/96, Monash University, Department of Econometrics and Business Statistics.
    55. James E. Anderson, 2010. "The Incidence of Gravity," Boston College Working Papers in Economics 732, Boston College Department of Economics.
    56. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koutchogna Kokou Edem Assogbavi & Stéphane Dées, 2023. "Environmental Policy and the CO2 Emissions Embodied in International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(2), pages 507-527, February.
    2. Willert, Bianca, 2017. "How intermediates trade affects the formation of free trade agreements: A study analyzing pairwise trade flows of 70 countries," Thuenen-Series of Applied Economic Theory 147, University of Rostock, Institute of Economics, revised 2017.
    3. Bulawayo, Maio & Mudenda, Dale & Ndulo, Manenga & Simwanza, Charles, 2020. "Does Immigration Stimulate Non-Traditional Exports? Evidence from Zambia," African Journal of Economic Review, African Journal of Economic Review, vol. 8(3), November.
    4. Saima Nawaz, 2020. "Institutions, Regional Integration and Bilateral Trade in South Asia: PPML Based Evidence," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(2), pages 221-242.
    5. Mario Larch & Joschka Wanner & Yoto V. Yotov & Thomas Zylkin, 2017. "The Currency Union Effect: A PPML Re-assessment with High-Dimensional Fixed Effects," CESifo Working Paper Series 6464, CESifo.
    6. Imran Ur Rahman & Mohsin Shafi & Liu Junrong & Enitilina Tatiani M.K. Fetuu & Shah Fahad & Buddhi Prasad Sharma, 2021. "Infrastructure and Trade: An Empirical Study Based on China and Selected Asian Economies," SAGE Open, , vol. 11(3), pages 21582440211, July.
    7. Rasoulinezhad, Ehsan, 2020. "Energy Trade and Economic Integration between the Commonwealth Independent States and China," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 35(1), pages 172-190.
    8. Redwanur Rahman & Saleh Shahriar & Sokvibol Kea, 2019. "Determinants of Exports: A Gravity Model Analysis of the Bangladeshi Textile and Clothing Industries," FIIB Business Review, , vol. 8(3), pages 229-244, September.
    9. Jones, Jonathan & Serwicka, Ilona & Wren, Colin, 2018. "Economic integration, border costs and FDI location: Evidence from the fifth European Union enlargement," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 193-205.
    10. Luigi Capoani, 2023. "Review of the gravity model: origins and critical analysis of its theoretical development," SN Business & Economics, Springer, vol. 3(5), pages 1-43, May.
    11. Germán González & Victoria Giordano, 2023. "Gravity Approach to the Impact of Crises on MERCOSUR Trade," Working Papers 280, Red Nacional de Investigadores en Economía (RedNIE).
    12. Emilio Calvo, 2021. "Redistribution of tax resources: a cooperative game theory approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(4), pages 633-686, December.
    13. Mancal, A. & Barros, G., 2018. "Determinants of West African international agricultural trade," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277203, International Association of Agricultural Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kareem, Fatima Olanike & Martinez-Zarzoso, Inmaculada & Brümmer, Bernhard, 2016. "Fitting the Gravity Model when Zero Trade Flows are Frequent: a Comparison of Estimation Techniques using Africa's Trade Data," GlobalFood Discussion Papers 230588, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    2. Scott L. Baier & Amanda Kerr & Yoto V. Yotov, 2018. "Gravity, distance, and international trade," Chapters, in: Bruce A. Blonigen & Wesley W. Wilson (ed.), Handbook of International Trade and Transportation, chapter 2, pages 15-78, Edward Elgar Publishing.
    3. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    4. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    5. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    6. Chen, Natalie & Novy, Dennis, 2008. "International Trade Integration: A Disaggregated Approach," CEPR Discussion Papers 7103, C.E.P.R. Discussion Papers.
    7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    8. Lars Håkanson & Douglas Dow, 2012. "Markets and Networks in International Trade: On the Role of Distances in Globalization," Management International Review, Springer, vol. 52(6), pages 761-789, December.
    9. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    10. Melitz, Jacques, 2007. "North, South and distance in the gravity model," European Economic Review, Elsevier, vol. 51(4), pages 971-991, May.
    11. Elisaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," Documents de Travail de l'OFCE 2012-17, Observatoire Francais des Conjonctures Economiques (OFCE).
    12. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9ji21mi9p3 is not listed on IDEAS
    13. Valeriano Martínez-San Román & Marta Bengoa & Blanca Sánchez-Robles, 2016. "Foreign direct investment, trade integration and the home bias: evidence from the European Union," Empirical Economics, Springer, vol. 50(1), pages 197-229, February.
    14. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2011. "Trade booms, trade busts, and trade costs," Journal of International Economics, Elsevier, vol. 83(2), pages 185-201, March.
    15. Estrella Gómez-Herrera, 2013. "Comparing alternative methods to estimate gravity models of bilateral trade," Empirical Economics, Springer, vol. 44(3), pages 1087-1111, June.
    16. Agnosteva, Delina E. & Anderson, James E. & Yotov, Yoto V., 2019. "Intra-national trade costs: Assaying regional frictions," European Economic Review, Elsevier, vol. 112(C), pages 32-50.
    17. Nuria Gallego & Carlos Llano, 2014. "The Border Effect and the Nonlinear Relationship between Trade and Distance," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1016-1048, November.
    18. Cletus C. Coughlin & Dennis Novy, 2013. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from US Trade," CESifo Economic Studies, CESifo Group, vol. 59(2), pages 249-276, June.
    19. Thi Mai Phuong, Chu & Tu, Thuy Anh, 2014. "On the border effect in the Regional Comprehensive Economic Partnership (RCEP)," Papers 910, World Trade Institute.
    20. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    21. Dreyer, Heiko, 2014. "Misaligned distance: Why distance can have a positive effect on trade in agricultural," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170455, Agricultural and Applied Economics Association.
    22. Bergstrand, Jeffrey H. & Larch, Mario & Yotov, Yoto V., 2015. "Economic integration agreements, border effects, and distance elasticities in the gravity equation," European Economic Review, Elsevier, vol. 78(C), pages 307-327.
    23. Gabriel Felbermayr & Jasmin Gröschl, 2014. "Within U.S. Trade And The Long Shadow Of The American Secession," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 382-404, January.

    More about this item

    Keywords

    distance effect; border effect;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwedp:201569. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.