
Heterogeneity and the distance puzzle
Archanskaia, Elizaveta; Daudin, Guillaume (2012), Heterogeneity and the distance puzzle. https://basepub.dauphine.fr/handle/123456789/10085
Type
Document de travail / Working paperDate
2012Publisher
OFCE
Series title
OFCE Working PapersSeries number
17Published in
Paris
Pages
40
Metadata
Show full item recordAbstract (EN)
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 13% from 1962 to 2009. The evolution of the distance coefficient is thus compatible with a 4% reduction in the elasticity of trade costs to distance.Subjects / Keywords
Gravity equation; distance puzzle; trade elasticity; trade costsRelated items
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