Monday, September 23th, 2019 –  13:00 – 14:00

Maison des Sciences Économiques, Room 116

 Maison des Sciences Économiques, 106-112 bd de l’Hôpital, 75013 Paris, Métro 5 Campo Formio, bus 57, 67, 27, 83 or 47

Guillaume Daudin

(University Paris-Dauphine)

with Elizaveta Archanskaia (Ku Leven) 

Product substitutability and the Distance Puzzle.

Abstract: We propose a novel explanation of the non-decreasing distance elasticity of trade over 1963-2013, commonly referred to as “the distance puzzle”. Consistently with previous work, we find that the changing composition of world trade point to a distance puzzle: trade has become more sensitive to distance through time. Our original contribution consists in documenting an increase of between 20 and 30 percent in the perceived substitutability of products traded on the world market over the same period. This elasticity corresponds to the elasticity of trade flows to trade costs on the intensive margin. In the Armington framework it determines the elasticity of trade flows to trade costs.The evolution of this parameter suffices to explain the non-decreasing distance elasticity of trade.