The Distance Puzzle: On the Interpretation of the Distance Coefficient in Gravity Equations
Posted: 9 Jul 2004
Although globalization has diminished the importance of distance, empirical gravity models find little change in distance coefficients. We argue that changing distance costs are largely reflected in the constant term. A proportional fall in distance costs is consistent with constant distance coefficients.
Keywords: Distance coefficients, Gravity equations, Globalization
JEL Classification: F0, F21
Suggested Citation: Suggested Citation