The Missing Globalization Puzzle

By David T. Coe, Arvind Subramanian, Natalia T. Tamirisa, Rikhil R Bhavnani. Social Science Research Network, 2002

122 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/b90846b74fdbe9308eaa2bd71d5680262b2e5544

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In Economics and Econometrics

Citations in the corpus

Networks of innovators within and across borders. Evidence from patent data (2013, background): “This issue has been thoroughly explored in the literature on trade through the lens of gravity models (Coe, 2002; Brun et al., 2005).”
Comparative advantage, demand for external finance, and financial development (2006, background): “(e.g. Frankel, Stein, and Wei, 1997, Eichengreen and Erwin, 1998, and Soloaga and Winters, 2001) nd the distance coe¢ cient increasing over time for various samples of countries and time periods, others (e.g. Coe et al., 2002, Brun et al., 2005) reach the opposite conclusion.”
Institutions, Infrastructure, and Trade (2007, background): “(See Coe et al 2002, Felbermayr and Kohler 2004, Santos and Tenreyro 2005.)”
The Puzzling Persistence of the Distance Effect on Bilateral Trade (2008, unknown): “sults. Brun et al. (2005) and Coe et al. (2002) conduct panel estimation of gravity equations”
Estimating Trade Policy Effects with Structural Gravity (2016, unknown): “Coe et al. (2002) generalize this result to define the ‘Missing Globalization Puzzle’ as “the failure of declining trade-related costs to be reflected in estimates of the standard gravity model of bilateral trade” (p.1). The same authors conclude that “globalization is everywhere but in estimated gr”
North, South and Distance in the Gravity Model (2007, background): “The rise has puzzled many and has given rise to a variety of suggested explanations: for example, Frankel (1997, p. 74), Coe et al. (2002) ,a ndAnderson and van Wincoop (2004, p. 731).”
Exploring the Intensive and Extensive Margins of World Trade (2004, unknown): “One might try to address this problem by means of nonlinear least squares (NLS), as in Silva and Tenreyro (2003) or Coe et al. (2002).”