Are Distance Effects Really a Puzzle

In this paper, I use gravity equation with all the possible controls and a large bilateral panel data over 50 years and more than175 countries to estimate the distance effect from 1950 to 1999. An extensive search reveals some new results: different from previous finding that distance effects rose around the middle of the 20th century, distances effects just rise quickly for nearly 20 years, from later 1960s to later 1980s and the distance effects are most affected by bilateral trade of non-high income countries. This rising distance effect owns to the fact that the bilateral trade between non-high income countries increase quickly and the extremely high trade cost between developing countries, therefore, there is no distance puzzle