James Feyrer has a column at VoxEU based on his NBER paper on the effect of the closure of the Suez Canal on trade. The pictures tell the tale pretty well
The latter figure is for country-pairs whose bilateral distance was increased by more than 50% due to the closure.
The natural experiment is clean, but what do we learn here? Supply curves slope up? Exchange creates wealth? — I guess I can feel at ease teaching undergraduates about that. 🙂
We can’t hope to recover useful fundamentals here, e.g. some structural technological parameter or functional form. This is data from decades ago.
[Awesome blog! Long-ish time reader, first time commenter, not a trade person but a fan of trade.]
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