Although globalization has diminished the importance of distance, empirical gravity models find little change in distance coefficients. We argue that changing distance costs are largely reflected in the constant term. A proportional fall in distance costs is consistent with constant distance...

We propose a methodology for gravity models which overcomes weakness of institutional distance measures identified in international business literature (Shenkar, 2001). Our methodology is based on combination of the distance approach with cluster analysis of states according to their...