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Has Distance Died? Evidence from a Panel Gravity Model

Author

Listed:
  • Jean-François BRUN

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Céline CARRERE

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

  • Jaime MELO DE
  • Patrick GUILLAUMONT

    (Centre d'Etudes et de Recherches sur le Développement International(CERDI))

Abstract

This paper reports panel gravity estimates of aggregate bilateral trade for 130 countries over the period 1962-96 in which the coefficient of distance is allowed to change over time. In a standard specification in which transport costs are proxied by distance only, it is found paradoxically that the absolute value of the elasticity of bilateral trade to distance has been significantly increasing.The result is attributed to a relatively larger decline in costs independent of distance (such as handling) than in distance-related costs (e.g. oil price). An extended version of the model that controls for these two factors eliminates this positive trend without reversing it. However, when the sample is split into two groups ("rich-rich" and "poor-poor"), the paradox is maintained for the "poor-poor" group. While not conclusive, these results are consistent with the view that poor countries may have been marginalized by the current wave of globalization.

Suggested Citation

  • Jean-François BRUN & Céline CARRERE & Jaime MELO DE & Patrick GUILLAUMONT, 2002. "Has Distance Died? Evidence from a Panel Gravity Model," Working Papers 200215, CERDI.
  • Handle: RePEc:cdi:wpaper:180
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    References listed on IDEAS

    as
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    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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