The Puzzling Persistence of the Distance Effect on Bilateral Trade

Abstract

One of the best established empirical results in international economics is that bi-lateral trade decreases with distance. Although well-known, these results have not been systematically analyzed before. We examine 1052 distance effects estimated in 78 papers. Information collected on each estimate allows us to test hypotheses about causes of variation in the estimates. We focus on the question of whether distance effects have fallen over time. We find that the negative impact of distance on trade is not shrinking, but increasing slightly over the last century. This result holds even after controlling for many important differences in samples and methods.

Keywords: Shrinking world, globalization, meta-analysis

JEL Classification: C10, F10