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Abstract

Is the geographical location of a country deterministic to its level of economic development? Although economic geographers have been searching the answers to this question for decades, incongruities between different opinions still exist. This paper takes both theoretical and empirical approaches to provide a systematic answer to this question. Firstly, this paper uses industry-level gravity model of international trade to demonstrate that not all countries are negatively affected by geographical remoteness. Secondly, it employs a panel data of 83 countries from 2000 to 2017 and substantiates that while geographical remoteness decreases income levels and trade balances in OECD countries, it increases or does not affect them in non-OECD countries. This finding is also confirmed by re-categorizing the countries based on the World Bank’s classification of high-income country and by carrying out quantile regressions. These results altogether imply that geographical remoteness is unlikely to be an economic disadvantage for certain groups of countries.

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