The Distance Puzzle Revisited: A New Interpretation Based on Geographic Neutrality
One of the best-established empirical results in international economics is that bilateral trade decreases with distance, despite the reductions in the costs of trade brought about by globalization. This working paper proposes an explanation to this apparent contradiction (labeled as the distance puzzle). It hinges on the concept of geographic neutrality, which is used to construct international trade integration indicators for two different scenarios, namely, when distance matters and when it does not. The results indicate that the importance of distance varies greatly across countries, as revealed by disparate gaps between distance-corrected and distance-uncorrected trade integration indicators for different countries. Some factors rooted in the literature explain away the discrepancies, but their importance varies according to the trade integration indicator considered-trade openness or trade connection.
|Date of creation:||Dec 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +34 94 487 52 52
Fax: +34 94 424 46 21
Web page: http://www.fbbva.es
More information through EDIRC
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.:
- David T Coe & Arvind Subramanian & Natalia T Tamirisa, 2007. "The Missing Globalization Puzzle: Evidence of the Declining Importance of Distance," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 34-58, May.
- Natalie Chen & Jean Imbs & Andrew Scott, 2006.
"The dynamics of trade and competition,"
Working Paper Research
91, National Bank of Belgium.
- Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
- Leamer, E. & Levingsohn, J., 1994.
"International Trade Theory: The Evidence,"
368, Research Seminar in International Economics, University of Michigan.
- Jeffrey A. Frankel, 2000. "Globalization of the Economy," NBER Working Papers 7858, National Bureau of Economic Research, Inc.
- Alberto Alesina & Enrico Spolaore, 1995.
"On the Number and Size of Nations,"
NBER Working Papers
5050, National Bureau of Economic Research, Inc.
- 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.
- Robert A. Mundell & Paul J. Zak, 2005. "Introduction," Chapters, in: International Monetary Policy after the Euro, chapter 1 Edward Elgar.
- Arribas, Iván & Pérez, Francisco & Tortosa-Ausina, Emili, 2009. "Measuring Globalization of International Trade: Theory and Evidence," World Development, Elsevier, vol. 37(1), pages 127-145, January.
- Raja Kali & Javier Reyes, 2007. "The architecture of globalization: a network approach to international economic integration," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 595-620, July.
- Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
- Rikhil Bhavnani & Natalia T. Tamirisa & Arvind Subramanian & David T. Coe, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:fbb:wpaper:201019. 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: (Fundacion BBVA / BBVA Foundation)
If references are entirely missing, you can add them using this form.