On Distance Effects in Gravity Models - Short Versus Long Distances

In this paper, the effect of distance on international trade is investigated for different groups of countries and over time. With this aim, the distance variable is broken down into intervals to find out whether there is a different distance effect for near and far away importers. When the distance "classes" are introduced into the gravity model of trade, the results indicate that the distance effect is significantly higher for developed than for developing countries only for short distances, whereas for long distances (over 2500 km) the distance effect is very similar for both groups of countries.