Abstract
In the empirical tools for the research of trade integration a special place is occupied by gravity models, insofar as these models have rather high accuracy in explaining mutual trade flows. Recently, however, the gravity model approach has been subjected to critical rethinking: globalization brought considerable changes not only in economic growth, but also in international trade, what allowed speaking about a “Death of Distance”. At the same time, estimates based on gravity models almost always demonstrated an increase in the coefficient of distance as a proxy for transport costs, which contradicts the general perception of the phenomenon of globalization. The paper is devoted to testing the validity of inclusion of the globalization index in the model, which would allow consider the role of globalization in bilateral cross-country trade, as well as testing the hypothesis of reducing the coefficient of distance. Based on the annual panel data over the period 2000-2016 the trade integration model for the EEU countries was estimated. To test the hypothesis of a decrease in the estimated coefficient of distance over time, the gravity model was also evaluated at different time intervals. And the positive impact of the globalization factor on the volume of exports is revealed.
Highlights
Within the framework of the world economy, under the influence of globalization, the national economies of individual countries are becoming more open and oriented towards international economic cooperation
According to the nonlinear relationships of the classical gravity model, all indicators were considered in a logarithmic form
Where Eij,t – value volume export from country i to country j, in thousands of USD; GDPi,t – GDP of country i, in thousands of USD; GDPj,t – GDP of country j, in thousands of USD; Rij – remoteness between capitals of countries i and j, km
Summary
Within the framework of the world economy, under the influence of globalization, the national economies of individual countries are becoming more open and oriented towards international economic cooperation. This contradicts the general perception of globalization, i.e. the assumption that distance should become less important over time in international trade, which means a decrease, not an increase, in the estimated distance coefficient (its absolute value) When discussing such paradoxical results, one is usually referred primarily to the study of Brun and others based on the traditional gravity model [10]. The fact that distance plays a significant role in trade integration in global markets for low income (or poor) countries, quite often found as conclusions from empirical studies This is emphasized by Borchert and Yotov, with the general conclusion that, on average, the effect of distance has decreased, while the effect of proximity and regional trade agreements has increased over time [15]. It all comes down to the fact that it’s too early to declare the death of distance
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