Publication

This paper examines the importance of distance coefficients in gravity equations and their change over time. The authors argue that changes in distance coefficients do not carry much information on changes in distance costs which are largely picked up in the constant term of gravity models. The distance coefficient instead measures the relative difference between far way and close countries. The authors conclude that a proportional fall in distance costs that leads to a proportional increase in economic activity would therefore be consistent with constant distance coefficients.