Have Developed Countries Escaped the Curse of Distance?

29 Pages Posted: 27 Aug 2008

See all articles by Herve Boulhol

Herve Boulhol

Université Paris I Panthéon-Sorbonne - IXIS-CIB

Alain de Serres

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: May 15, 2008

Abstract

There is widespread evidence that a better access to markets contributes to raising income levels. However, no quantification of the impact of distance to markets has been made on the basis of a sample restricted to advanced - and therefore more homogeneous - countries. This paper applies the framework developed by Redding and Venables (2004) on a panel data covering 21 OECD countries over 1970-2004, and shows that, relative to the average OECD country, the cost of remoteness for countries such as Australia and New Zealand can be as high as 10% of GDP. Conversely, the benefit for centrally-located countries like Belgium and the Netherlands could be around 6-7%. Second, the paper explains why the estimated parameter in the Redding-Venables model is biased upwards in cross-section samples that mix both developing and developed countries, because of the inability to adequately control for heterogeneity in technology levels across countries. The paper also provides a detailed discussion of the links between the "death-of-distance" hypothesis, the evolution of transport costs and the elasticity of trade to distance.

Keywords: economic geography, market access, distance, transport costs

JEL Classification: F12, F15, R11, R12

Suggested Citation

Boulhol, Herve and de Serres, Alain, Have Developed Countries Escaped the Curse of Distance? (May 15, 2008). Available at SSRN: https://ssrn.com/abstract=1259350 or http://dx.doi.org/10.2139/ssrn.1259350

Herve Boulhol

Université Paris I Panthéon-Sorbonne - IXIS-CIB ( email )

12, place du Panthéon
Paris, IL
France

Alain De Serres (Contact Author)

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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