Heterogeneity and the Distance Puzzle

Liza Archanskaia () and Guillaume Daudin

No 95, FIW Working Paper series from FIW

Abstract: This paper shows that reduced heterogeneity of exporter-specific goods can provide a direct explanation of the distance puzzle. Using COMTRADE 4-digit bilateral trade data we find that the elasticity of trade to distance has increased by 8% from 1962 to 2009. Theoretical foundations of the gravity equation indicate that the distance coefficient is the product of the elasticity of trade costs to distance and a measure of heterogeneity, e.g. the substitution elasticity between exporter-specific goods in the Armington framework. This parameter has increased by at least 12-29% from 1962 to 2009. The evolution of the distance coefficient is thus compatible with a 4-16% reduction in the elasticity of trade costs to distance.

Keywords: gravity equation; distance puzzle; trade elasticity; trade costs (search for similar items in EconPapers)
JEL-codes: F15 N70 (search for similar items in EconPapers)
Pages: 41
Date: 2012-05
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Heterogeneity and the distance puzzle (2017)
Working Paper: Heterogeneity and the distance puzzle (2017)
Working Paper: Heterogeneity and the Distance Puzzle (2012)
Working Paper: Heterogeneity and the Distance Puzzle (2012)
Working Paper: Heterogeneity and distance puzzle (2012)
Working Paper: Heterogeneity and distance puzzle (2012)
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