Revisiting Trade and Income in the New Era of Globalisation—Distance, Big Boats and Natural Barriers to Trade

Anil Gogebakan

The World Economy, 2025, vol. 48, issue 4, 886-921

Abstract: This paper investigates the relationship between international trade and income, exploiting a dynamic distance measure generated by the growth of container ships and Panama Canal capacity. Employing a version of the gravity model, this paper constructs an instrument for trade that accounts for bilateral trade flow differences driven by the Panama Canal and big ships. I exploit the created instrument, given its purely geography‐based nature, to estimate the impact of trade on income between 2002 and 2022. This paper finds a trade elasticity of income at 0.4, indicating that a one‐dollar increase in trade translates into a 40‐cent higher income on average. Compared to earlier studies, this indicates a more pronounced impact of trade on income in the recent era of globalisation.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/twec.13667

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:48:y:2025:i:4:p:886-921

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().