Brun, Jean-FrancoisCarrere, CelineGuillaumont, Patrickde Melo, Jaime2014-01-032014-01-032005-01World Bank Economic Reviewdoi:10.1093/wber/lhi004https://hdl.handle.net/10986/16487The estimated coefficient of distance on the volume of trade is generally found to increase rather than decrease through time using the traditional gravity model of trade. This distance puzzle proved robust to several ad hoc versions of the model using data for 1962-96 for a large sample of 130 countries. The introduction of an augmented barrier to trade function removes the paradox, yielding a decline in the estimate of the elasticity of trade to distance of about 11 percent over the 35-year period for the whole sample. However, the death of distance is shown to be largely confined to bilateral trade between rich countries, with poor countries becoming marginalized.en-USCC BY-NC-ND 3.0 IGOABSOLUTE VALUEAGGREGATE TRADEBILATERAL IMPORTSBILATERAL TRADEBILATERAL TRADE DATACDCOEFFICIENT ESTIMATECOMMODITYCOMMON COLONIZERCOMMON CURRENCYCOMMON MARKETCONSTANT ELASTICITY OF SUBSTITUTIONCONSUMPTION PRICE INDEXCONTRACT ENFORCEMENTCOST OF TRANSPORTCOUNTRY DUMMYCOUNTRY DUMMY VARIABLESCOUNTRY FIXED EFFECTSCURRENCYCURRENCY UNIONCURRENCY UNIONSCURRENCY VALUEDEPENDENT VARIABLEDEPRECIATIONDEVELOPING ECONOMIESDUMMY VARIABLEDUMMY VARIABLESECONOMETRICSECONOMIC POLICYECONOMIC RESEARCHECONOMICSELASTICITIESELASTICITYELASTICITY OF DEMANDELASTICITY OF SUBSTITUTIONELASTICITY OF TRADEELASTICITY OF ~ ~ SUBSTITUTIONENDOGENOUS VARIABLESERROR TERMEXCHANGE RATE UNCERTAINTYEXCHANGE RATE VOLATILITYEXOGENOUS VARIABLESEXPLANATORY VARIABLESEXPORTEREXPORTERSEXPORTSFACTOR ENDOWMENTSFEDERAL RESERVEFEDERAL RESERVE BANKFIXED EFFECTSFOREIGN DIRECT INVESTMENTFREE TRADEFREE TRADE AREAFREIGHTFREIGHT COSTSGDPGDP DEFLATORGLOBALIZATIONGRAVITY EQUATIONGRAVITY MODELGRAVITY MODELSGROSS DOMESTIC PRODUCTHIGH-INCOME COUNTRIESIMPORTINCOMEINCOME ELASTICITYINCOME ELASTICITY OF DEMANDINCOME GROWTHINCREASING RETURNSINDUSTRIAL COUNTRIESINDUSTRIALIZATIONINSTRUMENTAL VARIABLEINSTRUMENTAL VARIABLESINSURANCEINTERNATIONAL ECONOMICSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL MACROECONOMICSINTERNATIONAL TRADELAND TRANSPORTLOW-INCOME COUNTRIESMACROECONOMICSMARGINAL COSTMARITIME TRANSPORTMODE OF TRANSPORTMONETARY UNIONMONOPOLISTIC COMPETITIONMULTILATERAL TRADEMULTILATERAL TRADE ARRANGEMENTSOIL PRICEOIL PRICESPATTERN OF TRADEPER CAPITA INCOMEPOLITICAL ECONOMYPRICE INDEXPRICE INDEXESPRICE OF OILPRICE RATIOSPRIMARY COMMODITIESRAILWAYSREAL EFFECTIVE EXCHANGE RATEREAL EXCHANGE RATEREAL EXCHANGE RATESREGIONALISMREGIONALIZATIONRELATIVE PRICESROADSROBUSTNESS CHECKSROUTESSERIAL CORRELATIONSMALL COUNTRIESSPECIALIZATIONSUPPLY SIDETECHNOLOGICAL CHANGESTOTAL EXPORTSTRADE AGREEMENTSTRADE BARRIERTRADE BARRIERSTRADE COSTSTRADE MORETRADE PARTNERTRADE PATTERNSTRADE RELATIONSHIPSTRADE STATISTICSTRADING BLOCSTRADING PARTNERSTRANSACTION COSTSTRANSACTIONS COSTSTRANSITTRANSPORTTRANSPORT COSTSTRANSPORTATIONTRANSPORTATION COSTTRANSPORTATION COSTSUTILITY FUNCTIONUTILITY MAXIMIZATIONVOLUME OF TRADEWORLD DEVELOPMENT INDICATORSWORLD ECONOMYWORLD TRADEWORLD TRADE ORGANIZATIONJournal ArticleWorld Bank10.1596/16487