Fly the unfriendly skies: The role of transport costs in gravity models of trade

Tibor Besedes, Jing Chu and Antu Panini Murshid

Journal of International Economics, 2024, vol. 152, issue C

Abstract: We exploit exogenous shocks to flight distances over time to estimate the distance effect in airborne trade within panel regressions. We find a negative distance effect, which we interpret as evidence of a link between transportation costs and airborne trade. Notably, this relationship is driven almost entirely by changes at the extensive margin. Specifically, trade in HS 6 product categories with intermittent trading histories becomes dormant when flight distances increase. Conversely, the intensive margin of trade remains largely unaffected.

Keywords: Air cargo; Distance data; Geographic information systems; Gravity model; Natural experiment; Transportation costs (search for similar items in EconPapers)
JEL-codes: F14 F17 L93 N74 N75 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001211

DOI: 10.1016/j.jinteco.2024.103994

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