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The importance of business travel for trade: Evidence from the liberalization of the Soviet airspace

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  • Söderlund, Bengt

Abstract

The strong negative relationship between geographical distance and trade is not well understood. I use the liberalization of the Soviet airspace to estimate the causal impact of business travel cost on trade. The liberalization radically reduced travel time between Europe and East Asia and was followed by a significant increase in trade. I find that the cost of business travel can account for a large share of the trade frictions that cause trade to sharply decline with distance. A plausible explanation for these results is that face-to-face interaction through business travel is important for trade.

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  • Söderlund, Bengt, 2023. "The importance of business travel for trade: Evidence from the liberalization of the Soviet airspace," Journal of International Economics, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:inecon:v:145:y:2023:i:c:s0022199623000983
    DOI: 10.1016/j.jinteco.2023.103812
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    More about this item

    Keywords

    Trade costs; Air travel; Face-to-face communication;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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