A Simple Solution to the Distance Puzzle in International Trade

Yoto Yotov

No 2012-6, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: Despite ample anecdotal evidence for intensive international integration, the gravity literature of international trade fails to deliver consistent empirical support for globalization and for diminishing effects of distance on bilateral trade. Capitalizing on the properties of the structural gravity model, I propose a simple and intuitive solution to the alleged distance puzzle. Contrary to existing gravity estimates of distance effects that are persistent or increasing over time, I offer robust empirical evidence that the impact of distance on international trade in the world has fallen by close to 50% over the period 1965-2005.

Keywords: Structural Gravity; Distance Puzzle; (Missing) Globalization (search for similar items in EconPapers)
JEL-codes: F15 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2012-04-19
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (215)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2012_006

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