Distance, trade, and income — The 1967 to 1975 closing of the Suez canal as a natural experiment

This paper exploits a temporary shock to distance, the closing of Suez canal in 1967 and its reopening 1975, examine effect distance on trade income. Time series variation sea allows for inclusion pair effects which account static differences tastes culture between countries. Distance is found have significant impact with an elasticity that about half as large estimates from typical cross sectional estimates. Since exogenous most countries, predicted volume can be used identify Trade The time dimension country fixed control all long run income differences. Because identification through changes coming entirely goods not alternative channels such technology transfer, tourism, or foreign direct investment.