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Has the world become more interconnected? Distance and GDP comovements over time

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  • Ederington, Josh
  • Han, Yoonseon
  • Lindequist, David
  • Minier, Jenny

Abstract

It is commonly assumed that the drastic decline in trade costs over the past century has made the world more interconnected and reduced the importance of physical distance. However, empirical gravity regressions show that distance continues to play an important role in explaining trade flows. We investigate whether physical distance has also continued to affect GDP comovements between countries: that is, is it still the case that neighboring countries are more likely to have synchronized business cycles than countries further apart? We show that, while geographic distance was a significant predictor of GDP comovements between 1955–2000, this effect disappears after 2000. Thus, we find evidence for the “death of distance” when it comes to GDP comovements.

Suggested Citation

  • Ederington, Josh & Han, Yoonseon & Lindequist, David & Minier, Jenny, 2026. "Has the world become more interconnected? Distance and GDP comovements over time," Economics Letters, Elsevier, vol. 259(C).
    • Handle: RePEc:eee:ecolet:v:259:y:2026:i:c:s0165176525006214
    DOI: 10.1016/j.econlet.2025.112784
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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