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A Simple Solution to the Distance Puzzle in International Trade

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  • Yotov, Yoto

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

Abstract

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.

Suggested Citation

  • Yotov, Yoto, 2012. "A Simple Solution to the Distance Puzzle in International Trade," School of Economics Working Paper Series 2012-6, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2012_006
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    References listed on IDEAS

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    1. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2004. "The distance puzzle: on the interpretation of the distance coefficient in gravity equations," Economics Letters, Elsevier, vol. 83(3), pages 293-298, June.
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    More about this item

    Keywords

    Structural Gravity; Distance Puzzle; (Missing) Globalization;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration

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