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Gravity, log of gravity and the "distance puzzle"

  • Clément Bosquet

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Hervé Boulhol

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Estimations of gravity equations specified in logarithm generally conclude that the distance elasticity of trade has increased over time despite globalization. In contrast, building on Santos Silva and Tenreyro (2006), this elasticity is estimated to have been stable around 0.65-0.70 since the 1960s. Moreover, although FTAs tend to cover neighboring countries, this main result is robust to different treatments of FTA effects. The main estimated change refers to the impact of colonial linkages, which has been at least halved. This paper brings also several important methodological contributions to the analysis of gravity equations, including broad support for the Poisson PML estimator.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00401386.

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Date of creation: 03 Jul 2009
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Handle: RePEc:hal:cesptp:halshs-00401386
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00401386
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  1. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  2. Claudia M. Buch & Jörn Kleinert & Farid Toubal, 2003. "The Distance Puzzle: On the Interpretation of the Distance Coefficient in Gravity Equations," Kiel Working Papers 1159, Kiel Institute for the World Economy.
  3. Clément Bosquet & Hervé Boulhol, 2010. "Scale-dependence of the Negative Binomial Pseudo-Maximum Likelihood Estimator," Documents de travail du Centre d'Economie de la Sorbonne 10092, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  4. Head, Keith & Mayer, Thierry & Ries, John, 2009. "How remote is the offshoring threat?," European Economic Review, Elsevier, vol. 53(4), pages 429-444, May.
  5. Edward E. Leamer, 2007. "A Flat World, a Level Playing Field, a Small World After All, or None of the Above? A Review of Thomas L Friedman's The World is Flat," Journal of Economic Literature, American Economic Association, vol. 45(1), pages 83-126, March.
  6. 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.
  7. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  8. Joao Santos Silva & Silvana Tenreyro, 2009. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," LSE Research Online Documents on Economics 25506, London School of Economics and Political Science, LSE Library.
  9. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
  10. 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.
  11. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper 2005-03, Federal Reserve Bank of Atlanta.
  12. repec:inr:wpaper:21709 is not listed on IDEAS
  13. Céline Carrère & Jaime de Melo & John Wilson, 2013. "The Distance Puzzle And Low-Income Countries: An Update," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 717-742, 09.
  14. Lin, Faqin & Sim, Nicholas C.S., 2012. "Death of distance and the distance puzzle," Economics Letters, Elsevier, vol. 116(2), pages 225-228.
  15. 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.
  16. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
  17. Lionel Fontagne & Soledad Zignago, 2007. "A Re-evaluation of the Impact of Regional Agreements on Trade Patterns," Economie Internationale, CEPII research center, issue 109, pages 31-51.
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