On the Geography of Trade: Distance is Alive and Well

63 Pages Posted: 20 Sep 2003

See all articles by Maurice Schiff

Maurice Schiff

Fellow, Institute for the Study of Labor (IZA)

Celine Carrere

Université d'Auvergne - Clermont 1 - CERDI

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Date Written: September 2003

Abstract

It has been widely argued that, with the decline in trade costs (e.g., transport and communication costs), the importance of distance has declined over time. This paper examines the evolution of the geographic profile of countries' trade by studying the evolution of their distance of trade (DOT) in 1962-2000. The paper find that the DOT falls over time for the average country in the world, and that the number of countries with declining DOT is close to double those with increasing DOT. Thus, distance seems to have become more important over time for a majority of countries. The paper examines various hypotheses in order to explain the evolution of the DOT. One of the conclusions is that its evolution is unrelated to that of the overall level of trade costs but depends on the relative evolution of its components. We also examine the impact on the DOT of changes in production costs, customs costs, domestic transport costs, of air relative to land and ocean transport costs, of competition, exchange rate policy, regional integration, uneven growth, counter-season trade, and "just-in-time inventory management." The paper also offers some insights into how these changes may affect the home bias in consumption and the border effect.

Keywords: Distance, trade costs, regionalization

JEL Classification: F1, N70, O57

Suggested Citation

Schiff, Maurice W. and Carrere, Celine, On the Geography of Trade: Distance is Alive and Well (September 2003). Available at SSRN: https://ssrn.com/abstract=441467 or http://dx.doi.org/10.2139/ssrn.441467

Maurice W. Schiff (Contact Author)

Fellow, Institute for the Study of Labor (IZA) ( email )

Bonn
Germany

Celine Carrere

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

65 Boulevard Francois Mitterrand
63000 Clermont-Ferrand Cedex 1
France

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