Is Our World Going to Get a Whole Lot Smaller?
The surge of oil prices in recent years has led to speculation that rising transportation costs could end the period of dramatic world trade growth Ñin the words of Rubin (2009), ÒÉYour world is going to get a whole lot smaller.Ó Using data from ChinaÕs Customs Statistics, we examine the impact of oil prices on tradeÕs sensitivity to distance. We find that higher oil prices increase tradeÕs elasticity to distance, but that the economic effect is small. We also find that the effect is more pronounced for trade within global production networks, and less large for goods shipped by air.
|Date of creation:||Jan 2011|
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