# Heterogeneity and the distance puzzle

*Elizaveta Archanskaia* and
*Guillaume Daudin* ()

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Elizaveta Archanskaia: OFCE - Observatoire Français des Conjonctures économiques - Institut d'Études Politiques [IEP] - Paris - Fondation Nationale des Sciences Politiques [FNSP]

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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)

**New Economics Papers:** this item is included in nep-int

**Date:** 2017-03-27

**Note:** View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01496258

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**Related works:**

Working Paper: Heterogeneity and the Distance Puzzle (2012)

Working Paper: Heterogeneity and the Distance Puzzle (2012)

Working Paper: Heterogeneity and the Distance Puzzle (2012)

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