DP9614 What separates us? Sources of resistance to globalization

Author(s): Keith Head, Thierry Mayer
Publication Date: August 2013
Keyword(s): borders, distance, globalization, gravity, history, trade
JEL(s): F1
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9614

With increasing sophistication, economists have been estimating gravity equations for five decades. Robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain. We therefore advocate investigation of other sources of resistance, despite the greater difficulty involved in measuring and modeling them. From our selective review of recent findings, a unifying explanation emerges. A legacy of historical isolation and confl ict forged a world economy in which neither tastes nor information are homogeneously distributed. Cultural difference and inadequate information manifest themselves most strongly at national borders and over distance.