Is Our World Going to Get a Whole Lot Smaller?

Posted: 7 Mar 2011

See all articles by Byron Gangnes

Byron Gangnes

University of Hawaii - Department of Economics

Alyson C. Ma

University of San Diego School of Business

Ari Van Assche

HEC Montreal; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Date Written: March 4, 2011

Abstract

The surge of oil prices in recent years has led to speculation that rising transportation costs could end the period of dramatic world trade growth - in the words of Rubin (2009), "…Your world is going to get a whole lot smaller." Using data from China’s Customs Statistics, we examine the impact of oil prices on trade’s sensitivity to distance. We find that higher oil prices increase trade’s elasticity to distance, but that the economic effect is small. We also find that the effect is more pronounced for trade within global production networks, and less large for goods shipped by air.

Keywords: oil prices, distance, trade, vertical specialization, mode of transport, China

Suggested Citation

Gangnes, Byron and Ma, Alyson C. and Van Assche, Ari, Is Our World Going to Get a Whole Lot Smaller? (March 4, 2011). CIRANO Scientific Publication No. 2011s-31, Available at SSRN: https://ssrn.com/abstract=1777326 or http://dx.doi.org/10.2139/ssrn.1777326

Byron Gangnes

University of Hawaii - Department of Economics ( email )

Honolulu, HI 96822
United States

Alyson C. Ma

University of San Diego School of Business ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

Ari Van Assche (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

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