Heterogeneity and distance puzzle

Guillaume Daudin and Elizaveta Archanskaia (elizaveta.archanskaia@ofce.sciences-po.fr)
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Elizaveta Archanskaia: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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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 13% from 1962 to 2009. The evolution of the distance coefficient is thus compatible with a 4% reduction in the elasticity of trade costs to distance.

Keywords: gravity equation; distance puzzle; trade elasticity; trade costs (search for similar items in EconPapers)
Date: 2012-05
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01073683
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Citations: View citations in EconPapers (4)

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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)
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