The Missing Globalization Puzzle

30 Pages Posted: 3 Feb 2006  

David T. Coe

International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

Arvind Subramanian

International Monetary Fund (IMF); Center for Global Development

Natalia T. Tamirisa

International Monetary Fund (IMF)

Rikhil R Bhavnani

University of Wisconsin-Madison

Date Written: October 2002

Abstract

The failure of declining trade-related costs to be reflected in estimates of the standard gravity model of bilateral trade might be called the "missing globalization puzzle." This puzzle is most apparent in the estimated distance coefficients found in the literature, which show no evidence of declining in absolute value over time. In contrast, we find evidence of globalization, on both cross-section and panel data, reflected in a variety of measures of geography. Our estimation procedure is consistent with recent theoretical developments that emphasize the importance of relative costs for determining bilateral trade patterns. But the main reason our findings differ from previous studies is our nonlinear specification, which has a number of advantages over the standard log-linear specification.

Keywords: globalization trade gravity model distance

JEL Classification: F10 F15

Suggested Citation

Coe, David T. and Subramanian, Arvind and Tamirisa, Natalia T. and Bhavnani, Rikhil R, The Missing Globalization Puzzle (October 2002). IMF Working Paper, Vol. , pp. 1-30, 2002. Available at SSRN: https://ssrn.com/abstract=880215

David T. Coe (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Arvind Subramanian

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

Natalia T. Tamirisa

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Rikhil R Bhavnani

University of Wisconsin-Madison ( email )

110 North Hall
1050 Bascom Mall
Madison, WI 53706-1481
United States

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