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The Gravity of Globalization

  • Diego Agudelo

    (EAFIT University)

  • Larry Davidson

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Can changes in the trade of the world’s largest trading countries be considered more global? Or should they be labeled as more regional? We investigated these questions for the G7 countries for the time period from 1980 to 1997. We found that the usual dichotomy of global-regional is not rich enough to answer these questions because globalization can be measured in terms of both physical and cultural distance. Our new taxonomy allows for testing these separate impacts on world trade and suggests that trade changes are best described as regional, though with some qualification. With respect to physical distance, we find that trade is clearly becoming more regional. On the cultural dimension, however, we find conflicting results. These results are robust to a series of tests. We find the same pattern at industry level, except for Paper Products and Motor Vehicles. The regionalization pattern holds for both imports to and exports from the G7, but it is stronger for exports.

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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-15.

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Date of creation: 2006
Date of revision:
Handle: RePEc:iuk:wpaper:2006-15
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  1. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
  2. Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 437-466.
  3. Engel, Charles M & Rose, Andrew K, 2001. "Currency Unions and International Integration," CEPR Discussion Papers 2659, C.E.P.R. Discussion Papers.
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  7. T. Otsubo, Shigeru & Umemura, Tetsuo, 2003. "Forces Underlying Trade Integration in the APEC Region: A Gravity Model Analysis of Trade, FDI, and Complementarity," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 18, pages 126-149.
  8. Alan M. Rugman & Alain Verbeke, 2004. "Regional Transnationals and Triad Strategy," Working Papers 2004-20, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  9. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  10. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  11. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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