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A Simple Solution to the Distance Puzzle in International Trade

  • Yotov, Yoto

    ()

    (Department of Economics & International Business LeBow College of Business Drexel University)

Despite ample anecdotal evidence for intensive international integration, the gravity literature of international trade fails to deliver consistent empirical support for globalization and for diminishing effects of distance on bilateral trade. Capitalizing on the properties of the structural gravity model, I propose a simple and intuitive solution to the alleged distance puzzle. Contrary to existing gravity estimates of distance effects that are persistent or increasing over time, I offer robust empirical evidence that the impact of distance on international trade in the world has fallen by close to 50% over the period 1965-2005.

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File URL: http://dl.dropboxusercontent.com/u/162210677/RePEc/drx/wpaper/LeBow%20College%20of%20Business%20Working%20Paper%202012-6.pdf
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Paper provided by LeBow College of Business, Drexel University in its series School of Economics Working Paper Series with number 2012-6.

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Length: 11 pages
Date of creation: 19 Apr 2012
Date of revision:
Handle: RePEc:ris:drxlwp:2012_006
Contact details of provider: Web page: http://www.lebow.drexel.edu/

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  1. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," NBER Working Papers 17835, National Bureau of Economic Research, Inc.
  2. Santos Silva, J.M.C & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  3. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  4. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," NBER Working Papers 14423, National Bureau of Economic Research, Inc.
  5. Jean-François BRUN & Céline CARRERE & Patrick GUILLAUMONT & Jaime MELO DE, 2002. "Has Distance Died? Evidence from a Panel Gravity Model," Working Papers 200215, CERDI.
  6. Hervé Boulhol & Alain de Serres, 2010. "Have developed countries escaped the curse of distance?," Journal of Economic Geography, Oxford University Press, vol. 10(1), pages 113-139, January.
  7. Carrere, Celine & Schiff, Maurice, 2004. "On the geography of trade : distance is alive and well," Policy Research Working Paper Series 3206, The World Bank.
  8. De Sousa, Jose, 2011. "The currency union effect on trade is decreasing over time," MPRA Paper 35448, University Library of Munich, Germany.
  9. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  10. Clément Bosquet & Hervé Boulhol, 2009. "Gravity, log of gravity and the "distance puzzle"," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00401386, HAL.
  11. 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.
  12. 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.
  13. Lin, Faqin & Sim, Nicholas C.S., 2012. "Death of distance and the distance puzzle," Economics Letters, Elsevier, vol. 116(2), pages 225-228.
  14. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers 2011-25, CEPII research center.
  15. repec:inr:wpaper:21709 is not listed on IDEAS
  16. Rikhil Bhavnani & Natalia T. Tamirisa & Arvind Subramanian & David T. Coe, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund.
  17. Larch, Mario & Norbäck, Pehr-Johan & Sirries, Steffen & Urban, Dieter, 2013. "Heterogeneous Firms, Globalization and the Distance Puzzle," Working Paper Series 957, Research Institute of Industrial Economics.
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