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A simple solution to the distance puzzle in international trade
Journal article   Peer reviewed

A simple solution to the distance puzzle in international trade

Yoto V. Yotov
Economics letters, v 117(3), pp 794-798
Dec 2012

Abstract

(Missing) globalization Distance puzzle Structural gravity
I propose a simple solution to the distance puzzle in international trade. Contrary to existing estimates of persistent or increasing distance effects on trade, I offer robust evidence that the impact of distance on trade has fallen steadily over time. ► I propose a simple and intuitive solution to the distance puzzle in trade. ► To solve the puzzle, I rely on the properties of the structural gravity model. ► Globalization should be measured relative to integration within national markets. ► I offer robust evidence for steadily falling distance effects on international trade. ► I demonstrate that the gravity model is well suited to capture globalization effects.

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