North, South and Distance in the Gravity Model
It is generally assumed that distance in the gravity model strictly reflects frictions impeding bilateral trade. However, distances North-South could also reflect differences in factor endowment that provide opportunities for profitable trade. This paper investigates the hypothesis that if we control for distance in the ordinary sense, differences North-South promote international trade. The hypothesis receives ample support. Moreover, the significance of differences North-South survives a battery of robustness tests, concerning period, distinctions between differences in latitude North-North, North-South and South-South, and controls for other measures of differences in factor endowment, such as differences in per capita output and differences in average temperature, rainfall, and seasonal range in temperature. The impact of differences North-South on bilateral trade has also been falling. This decline, in turn, might be partly responsible for the weakening of the influence of distance that has been occurring since World War II. This last hypothesis receives confirmation as well. Finally, the paper studies two country-specific aspects of distance: internal distance and remoteness. It does so by examining the impact of both on the country fixed effects themselves: that is, those that emerged earlier. Internal distance turns out to have a far greater impact than remoteness – by an order of ten.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jul 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
- Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
- Jacques Melitz, 2003.
"Language and Foreign Trade,"
2003-26, Centre de Recherche en Economie et Statistique.
- Holger C. Wolf, 1997. "Patterns of Intra- and Inter-State Trade," NBER Working Papers 5939, National Bureau of Economic Research, Inc.
- Céline Carrère & Maurice Schiff, 2005.
"On the Geography of Trade. Distance is Alive and Well,"
Presses de Sciences-Po, vol. 56(6), pages 1249-1274.
- Céline CARRERE & Maurice SCHIFF, 2004. "On the Geography of Trade: Distance is Alive and Well," Working Papers 200423, CERDI.
- Carrere, Celine & Schiff, Maurice, 2004. "On the geography of trade : distance is alive and well," Policy Research Working Paper Series 3206, The World Bank.
- Simon J. Evenett & Wolfgang Keller, 1996.
"On Theories Explaining the Success of the Gravity Equation,"
9608001, EconWPA, revised 13 Jun 1997.
- Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
- Evenett, S. J. & Keller, W., 1994. "On Theories Explaining the Success of the Gravity Equation," Working papers 9713, Wisconsin Madison - Social Systems.
- Simon J. Evenett & Wolfgang Keller, 1998. "On Theories Explaining the Success of the Gravity Equation," NBER Working Papers 6529, National Bureau of Economic Research, Inc.
- 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
- Leamer, E. & Levingsohn, J., 1994. "International Trade Theory: The Evidence," Working Papers 368, Research Seminar in International Economics, University of Michigan.
- Edward E. Leamer & James Levinsohn, 1994. "International Trade Theory: The Evidence," NBER Working Papers 4940, National Bureau of Economic Research, Inc.
- John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
- Barry Eichengreen & Douglas A. Irwin, 1996.
"The Role of History in Bilateral Trade Flows,"
NBER Working Papers
5565, National Bureau of Economic Research, Inc.
- 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 143-53, February.
- 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.
- Anne-Célia Disdier & Keith Head, 2008. "The puzzling persistence of the distance effect on bilateral trade," Post-Print hal-01172854, HAL.
- Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d'Agliano, University of Milano.
- James E. Anderson & Eric van Wincoop, 2004.
Journal of Economic Literature,
American Economic Association, vol. 42(3), pages 691-751, September.
- 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.
- Berthelon, Matias & Freund, Caroline, 2004. "On the conservation of distance in international trade," Policy Research Working Paper Series 3293, The World Bank.
- Rikhil Bhavnani & Natalia T. Tamirisa & Arvind Subramanian & David T. Coe, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund.
- 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.
- Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
- Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
- Alan Deardorff, 1998.
"Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?,"
in: The Regionalization of the World Economy, pages 7-32
National Bureau of Economic Research, Inc.
- Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
- Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
- 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.
- David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct email address
If references are entirely missing, you can add them using this form.