Low-income countries intensify regional trade, reshaping global economic landscape.
The distance effect in trade has been increasing for low-income countries since the 1970s, a phenomenon known as the 'distance puzzle'. Poor countries have been trading more with closer partners and choosing new partners that are nearby, leading to a regionalization of their trade. This trend does not apply to richer countries. Low-income countries have seen a significant rise in the distance effect on their trade, while richer countries have not. This regionalization could be due to increased integration of low-income countries in the global economy or their greater marginalization.