Tax morale and peer effects

We examine whether the impact of transportation costs originating from physical distance in the global coffee trade does not decrease over time (i.e., “the distance puzzle”) by applying a gravity model from 2009 to 2019. We account for contiguous borders due to their direct impact on transportation costs.We also examinethe effect of cultural distance stemming from colonial dependency, common colonizer, and common language. Our results reveal that transportation costs are initially stable but show a negative trend in the long run, particularly post-2015. Moreover, contiguous borders have a significantly positive impact on the coffee trade. Finally, colonial dependency and common colonizers(common language)significantly increased(decreased)the coffee trade.