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The Missing Globalization Puzzle: Another Explanation

Author

Listed:
  • Boriss Siliverstovs
  • Dieter Schumacher

Abstract

This study suggests another explanation of the "missing globalization puzzle" typically observed in the empirical gravity models. In contrast to the previous research that focused on aggregated trade flows, we employ the trade flows in manufacturing products broken down by 25 three-digit ISIC Rev.2 categories. We estimate the distance coefficient using the log-linear specification of the standard as well as the generalized gravity equations. Our data set comprises trade flows for 22 OECD countries that span the time period from 1970 till 2000. We observe a substantial decline in the value of the distance elasticity in most manufacturing industries.

Suggested Citation

  • Boriss Siliverstovs & Dieter Schumacher, 2007. "The Missing Globalization Puzzle: Another Explanation," Discussion Papers of DIW Berlin 735, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp735
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.74151.de/dp735.pdf
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    More about this item

    Keywords

    Gravity model; missing globalization puzzle; distance coefficient;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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