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Is Our World Going to Get a Whole Lot Smaller?


  • Byron S. Ganges

    () (University of Hawaii at Manoa; Visiting Professor, Yokohama National University)

  • Alyson C. Ma

    () (University of San Diego)

  • Ari Van Assche

    () (HEC Montreal, Katholieke Universiteit Leuven and CIRANO)


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.

Suggested Citation

  • Byron S. Ganges & Alyson C. Ma & Ari Van Assche, 2011. "Is Our World Going to Get a Whole Lot Smaller?," Working Papers 2011-1, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  • Handle: RePEc:hae:wpaper:2011-1

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    References listed on IDEAS

    1. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
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    Cited by:

    1. Sacks, Audrey & Rahman, Erman & Turkewitz, Joel & Buehler, Michael & Saleh, Imad, 2014. "The dynamics of centralized procurement reform in a decentralized state : evidence and lessons from Indonesia," Policy Research Working Paper Series 6977, The World Bank.

    More about this item


    oil prices; distance; trade; vertical specialization; mode of transport; China.;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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