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Death of distance and the distance puzzle

  • Lin, Faqin
  • Sim, Nicholas C.S.

Despite the onset of globalization, year-by-year cross-country regressions of the gravity model usually suggest that the impediment of geographical distance on bilateral trade is rising, and not declining, over time. This effect of distance is dubbed the distance puzzle. In this paper, we argue that prima facie evidence of the distance effect from the year-by-year regressions may not be a good indicator of the true impact of distance on trade.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 116 (2012)
Issue (Month): 2 ()
Pages: 225-228

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Handle: RePEc:eee:ecolet:v:116:y:2012:i:2:p:225-228
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  1. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
  2. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2004. "The distance puzzle: on the interpretation of the distance coefficient in gravity equations," Economics Letters, Elsevier, vol. 83(3), pages 293-298, June.
  3. 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.
  4. Andrew K. Rose, 2002. "Do We Really KNow that the WTO Increases Trade?," Working Papers 182002, Hong Kong Institute for Monetary Research.
  5. Céline CARRERE & Maurice SCHIFF, 2004. "On the Geography of Trade: Distance is Alive and Well," Working Papers 200423, CERDI.
  6. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  7. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  8. Thierry Mayer, 2009. "Market Potential and Development," Working Papers 2009-24, CEPII research center.
  9. 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.
  10. David S. Jacks, 2009. "On the Death of Distance and Borders: Evidence from the Nineteenth Century," NBER Working Papers 15250, National Bureau of Economic Research, Inc.
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