Are distance effects really a puzzle? |
| |
| Institution: | 1. Fujian Branch of China Construction Bank, PR China;2. Xiamen University, PR China;3. Economics & Management of Shanghai Jiao Tong University, PR China;4. School of Economics and Management, Fuzhou University, PR China;1. China Academy of Public Finance and Public Policy, Central University of Finance and Economics, 39 South College Rd., Beijing 100081, China;2. School of Economics, Renmin University of China, 59 Zhongguancun St., Beijing 100872, China;1. Shandong Institute of Business and Technology, Yantai, China;2. University of Cincinnati, Cincinnati, OH, USA;3. Pusan National University, Busan, South Korea |
| |
| Abstract: | Given the distance proxies for trade costs, the onset of globalization implies that geographical distance would matter less for trade. However, year-on-year regressions of a log-linearized gravity model estimated by the ordinary least squares (OLS) method usually suggest that the negative impact of distance on trade is rising since the 1950s during the late 20th century. These seemingly counter-intuitive results may occur due to the omission of the extensive margin as well as the neglect of the Jensen's inequality. This paper investigates these two potential solutions but that only the second seems to work. After considering Jensen's inequality, the distance effects declined over the period 1950–1999. In addition, this paper proposes a simple theoretical model to identify trade costs. The empirical results also show a declining trend of trade costs over the same time period. |
| |
| Keywords: | |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
