Gravity, log of gravity and the "distance puzzle"

Clément Bosquet (1) , Hervé Boulhol (2)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 CES - Centre d'économie de la Sorbonne

Estimations of gravity equations specified in logarithm generally conclude that the distance elasticity of trade has increased over time despite globalization. In contrast, building on Santos Silva and Tenreyro (2006), this elasticity is estimated to have been stable around 0.65-0.70 since the 1960s. Moreover, although FTAs tend to cover neighboring countries, this main result is robust to different treatments of FTA effects. The main estimated change refers to the impact of colonial linkages, which has been at least halved. This paper brings also several important methodological contributions to the analysis of gravity equations, including broad support for the Poisson PML estimator.

Mots clés: distance puzzle; gravity equations; international trade; pseudo-maximum likelihood methods

Domaines: Economies et finances

Clément Bosquet, Hervé Boulhol. Gravity, log of gravity and the "distance puzzle". 2009. ⟨halshs-00401386⟩