Has distance died? An update

Abstract

Contrary to expectations, evidence of a death of distance has eluded numerous estimations in the popular gravity model of trade: estimates of the coefficient of distance are markedly higher in studies with recent data. This column shows that this is only so for the poorer countries who are trading with geographically closer partners. This regionalization of trade for low-income countries could reflect the dramatic decrease in a host of costs independent of distance (MFN tariffs, border-related costs, administrative costs, communication costs or increasing containerization), all of which would enhance the relative importance of transport costs that depend on distance.
Citation

Carrère, C. and J. de Melo "Has distance died? An update" Ferdi, Policy brief B04, November 2009