The Gravity of Distance: Evidence from a Trade Embargo

Afnan Al-Malk (), Jean-François Maystadt and Maurizio Zanardi
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Afnan Al-Malk: Department of Finance and Economics, Qatar University

No 2022014, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: On June 5th, 2017, an airspace blockade was imposed on the state of Qatar by Bahrain, Saudi Arabia, United Arab Emirates (neighboring countries) and Egypt. We exploit this exogenous increase in air transportation costs towards non-blockading countries to examine the effect of increased travel distance, due to re-routing, on bilateral trade. Based on a gravity model estimated with a Poisson pseudo-maximum likelihood estimator, we find a distance elasticity of imports between -0.3 and -0.5. Overcoming the limitations of cross-sectional studies and taking advantage of this quasi-natural experiment, our findings are robust and revise downwards previous estimates of the distance elasticity.

Keywords: Embargo; Distance Effect; International Trade (search for similar items in EconPapers)
JEL-codes: F14 L93 (search for similar items in EconPapers)
Date: 2022-06-08
New Economics Papers: this item is included in nep-ara, nep-int and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2022014

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