The Distance Puzzle: On the Interpretation of the Distance Coefficient in Gravity Equations

Although globalization has diminished the importance of distance, empirical gravity models find little change in distance coefficients. We argue that changing distance costs are largely reflected in the constant term. A proportional fall in distance costs is consistent with constant distance coefficients.

15. June 2004

Authors Claudia M. Buch J. Kleinert Farid Toubal