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Is Our World Going to Get a Whole Lot Smaller?

Listed author(s):
  • 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)

Registered author(s):

    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.

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    Paper provided by University of Hawaii Economic Research Organization, University of Hawaii at Manoa in its series Working Papers with number 2011-1.

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    Length: 41 pages
    Date of creation: Jan 2011
    Handle: RePEc:hae:wpaper:2011-1
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    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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