Therefore, distance is included as another trade cost variable. Data on distance between Germany and the countries of origin of imports, and the countries of destination of exports, are taken from the CEPII’s GeoDist database (Mayer and Zignago 2011).
The “distw” – measure is used that calculates the distance between two countries based on bilateral distances between the biggest cities of those two countries, those inter-city distances being weighted by the share of the city in the overall country’s population (see Mayer and Zignago (2011, p. 11) for details).