Has Distance Died? Evidence from a Panel Gravity Model

36 Pages Posted: 25 Sep 2002

See all articles by Jean-Francois Brun

Jean-Francois Brun

Universite d'Auvergne - Clermont 1 - CERDI

Celine Carrere

Université d'Auvergne - Clermont 1 - CERDI

Patrick Guillaumont

Universite d'Auvergne - Clermont 1 - CERDI

Jaime de Melo

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank

Date Written: August 2002

Abstract

This paper reports panel gravity estimates of aggregate bilateral trade for 130 countries over the period 1962-96 in which the coefficient of distance is allowed to change over time. In a standard specification, in which transport costs are proxied only, it is found paradoxically that the absolute value of the elasticity of bilateral trade to distance has been significantly increasing. The result is attributed to a relatively larger decline in costs independent of distance (such as handling) than in distance-related costs (e.g. oil price). An extended version of the model that controls for these two factors eliminates this positive trend without reversing it. However, when the sample is split into two groups ('rich-rich' and 'poor-poor'), the paradox is maintained for the 'poor-poor' group. While not conclusive, these results are consistent with the view that poor countries may have been marginalized by the current wave of globalization.

Keywords: Globalization, transport costs, distance, panel gravity model

JEL Classification: F12

Suggested Citation

Brun, Jean-Francois and Carrere, Celine and Guillaumont, Patrick and de Melo, Jaime, Has Distance Died? Evidence from a Panel Gravity Model (August 2002). Available at SSRN: https://ssrn.com/abstract=333700

Jean-Francois Brun (Contact Author)

Universite d'Auvergne - Clermont 1 - CERDI ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

Celine Carrere

Université d'Auvergne - Clermont 1 - CERDI ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

Patrick Guillaumont

Universite d'Auvergne - Clermont 1 - CERDI ( email )

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

Jaime De Melo

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland
+41 22 705 8273 (Phone)
+41 22 705 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/demelo/Jaime.html

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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