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The Missing Globalization Puzzle
Author:
Mr. Rikhil Bhavnani null

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Ms. Natalia T. Tamirisa
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Mr. Arvind Subramanian
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Mr. David T. Coe
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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 171
Language:
English
Publication Date:
01 Oct 2002
DOI:
https://doi.org/10.5089/9781451858518.001
ISBN:
9781451858518
ISSN:
1018-5941
Pages:
30
Keywords:
WP; distance coefficient; free trade; globalization; trade; gravity model; distance; trade cost; transport cost; adjacency coefficient; remoteness coefficient; switch sign; Gravity models; Plurilateral trade; Trade liberalization; Trade agreements; Global; Europe; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The failure of declining trade-related costs to be reflected in estimates of the standard gravity model of bilateral trade might be called the "missing globalization puzzle." This puzzle is most apparent in the estimated distance coefficients found in the literature, which show no evidence of declining in absolute value over time. In contrast, we find evidence of globalization, on both cross-section and panel data, reflected in a variety of measures of geography. Our estimation procedure is consistent with recent theoretical developments that emphasize the importance of relative costs for determining bilateral trade patterns. But the main reason our findings differ from previous studies is our nonlinear specification, which has a number of advantages over the standard log-linear specification.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund