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Heterogeneity and the Distance Puzzle

Author

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  • Elizaveta Archanskaia

    () (KU Leuven, Sciences-Po-OFCE)

  • Guillaume Daudin

    () (PSL, Université Paris-Dauphine, LEDa, UMR DIAL, Sciences-Po, OFCE)

Abstract

(english) This paper shows that declining exporter-specific product heterogeneity can explain the nondecreasing distance elasticity of trade in 1963-2009. The paper first examines common explanations of the distance puzzle: sample and sectorial composition effects and the rise of FTAs. In the Armington framework, perceived increasing substitutability of exporter specific product bundles, i.e. the elasticity of trade flows to trade costs, can explain an increase in the distance coefficient. We provide robust empirical evidence that was the case over 1963-2009. Consequently, the well-documented increase in the distance coefficient is compatible with a reduction in the elasticity of trade costs to distance. _________________________________ (français) Cet article montre que la diminution de l'hétérogénéité des variétés de produits par chaque exportateur peut expliquer l'absence de réduction de l'élasticité du commerce à la distance entre 1963 et 2009. L'article examine tout d'abord des explications courantes de ce « paradoxe de la distance » : l'effet d'échantillon, l'effet de composition et la montée des traités de libre-échange. Dans le cadre d'Armington, l'augmentation de la substituabilité subjective entre les paniers de biens produits par chaque exportateur, autrement dit l'élasticité des flux commerciaux aux coûts du commerce, peut expliquer l'augmentation du coefficient de la distance. Nous fournissons des données empiriquement robustes pour montrer que cela a été le cas entre 1963 et 2009. En conséquence, l'augmentation du coefficient de la distance est bien compatible avec une baisse de l'élasticité des coûts du commerce à la distance.

Suggested Citation

  • Elizaveta Archanskaia & Guillaume Daudin, 2012. "Heterogeneity and the Distance Puzzle," Working Papers DT/2012/09, DIAL (Développement, Institutions et Mondialisation).
  • Handle: RePEc:dia:wpaper:dt201209
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    Cited by:

    1. Lendle, Andreas & Olarreaga, Marcelo & Schropp, Simon & Vézina, Pierre-Louis, 2012. "There goes gravity: how eBay reduces trade costs," CEPR Discussion Papers 9094, C.E.P.R. Discussion Papers.
    2. repec:bla:reviec:v:25:y:2017:i:3:p:649-676 is not listed on IDEAS
    3. Hakan Yilmazkuday, 2017. "A Solution to the Missing Globalization Puzzle by Non-CES Preferences," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 649-676, August.
    4. Egger, Peter & Nigai, Sergey, 2015. "Structural Gravity with Dummies Only," CEPR Discussion Papers 10427, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Gravity equation; distance puzzle; trade elasticity; trade costs; Equation de gravité; paradoxe de la distance; élasticité du commerce; coûts du commerce.;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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