loved the book From Beirut to Jerusalem by Thomas Friedman (1998) when I read it (at the time). After that, I enthusiastically bought and read his The lexus and the olive tree. I got something from that book but not a whole lot. When The world is flat came out, I read an extended essay which he put out in the The New York Times and chose to skip the book. Friedman engages in too much rhetoric and now I see the book as the latest `management guru' book. I never read management gurus.
Today, I read a marvellous essay on the book by Edward Leamer which is forthcoming in Journal of Economic Literature. Much unlike Thomas Friedman, it is actually insightful and (atleast for me) said new things about globalisation other than the obvious insights of gains from trade based on diminishing frictions. If you've been uptodate with the field of international trade, it might be familiar territory, but for the rest, it's a great read.
I was struck by the fact that over time, the distance coefficient in gravity models has not dropped. It is a really surprising result. I wonder why this happens. Certainly, looking from an Indian perspective, there has been a huge upsurge of trade to faraway locations, made possible by reduced transaction costs. In particular, in terms of BPO, India appears to do huge trade with faraway locations (e.g. UK and UK) and negligible trade with close-by places. This doesn't sound like a gravity model story to me. (Richard Portes & Helene Rey have this famous result from 1999 on gravity model type stories with capital flows also, and there also, I feel that India's a bit of an outlier, doing very little business with the immediate neighbourhood.)
One possibility that struck me was like this. In the last 30 years, there have been impor ...