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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. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  2. 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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