Multidimensionality and Gravity in Global Trade, 1950-2000

Abstract

The expansion of global trade in the post-war period is subject to various interpretations. Some stress the trade-promoting role of the novel features in the world economy; some insist on the role of traditional factors, such as geographic distance, political difference and cultural dissimilarity, in continuously depressing trade flows; others even argue that the importance of these traditional factors has been on the rise. To adjudicate the divergence, this article applies the gravity model to a large data set on global bilateral trade from 1950 through 2000. Although the global institutional factor does promote bilateral trade and global economic activity indeed becomes more trade-generating, the trade-depressing effects of geographic distance, political difference and cultural dissimilarity remain strong. Moreover, geographic and cultural proximity actually generates greater gravity over time that draws countries together, which may trigger fragmentation in global trade along geo-cultural lines.

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