Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121092
Authors: 
Archanskaia, Elizaveta
Daudin, Guillaume
Year of Publication: 
2012
Series/Report no.: 
FIW Working Paper 95
Abstract: 
This paper shows that reduced heterogeneity of exporter-specific goods can provide a direct explanation of the distance puzzle. Using COMTRADE 4-digit bilateral trade data we find that the elasticity of trade to distance has increased by 8% from 1962 to 2009. Theoretical foundations of the gravity equation indicate that the distance coefficient is the product of the elasticity of trade costs to distance and a measure of heterogeneity, e.g. the substitution elasticity between exporter-specific goods in the Armington framework. This parameter has increased by at least 12-29% from 1962 to 2009. The evolution of the distance coefficient is thus compatible with a 4-16% reduction in the elasticity of trade costs to distance.
Subjects: 
gravity equation
distance puzzle
trade elasticity
trade costs
JEL: 
F15
N70
Document Type: 
Working Paper

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