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Gravity, log of gravity and the "distance puzzle"

Clement Bosquet () and Herve Boulhol

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Estimations of gravity equations specified in logarithm generally conclude that the distance elasticity of trade has increased over time despite globalization. In contrast, building on Santos Silva and Tenreyro (2006), this elasticity is estimated to have been stable around 0.65-0.70 since the 1960s. Moreover, although FTAs tend to cover neighboring countries, this main result is robust to different treatments of FTA effects. The main estimated change refers to the impact of colonial linkages, which has been at least halved. This paper brings also several important methodological contributions to the analysis of gravity equations, including broad support for the Poisson PML estimator.

Keywords: distance puzzle; gravity equations; international trade; pseudo-maximum likelihood methods (search for similar items in EconPapers)
Date: 2009-07-03
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00401386
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