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Intra-national versus international trade in the European Union: why do national borders matter?

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  • Chen, Natalie

Abstract

Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of ‘border effects’ among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 63 (2004)
Issue (Month): 1 (May)
Pages: 93-118

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Handle: RePEc:eee:inecon:v:63:y:2004:i:1:p:93-118

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  4. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
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  8. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
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  10. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  11. Helliwell, John F, 2002. "Measuring the Width of National Boarders," Review of International Economics, Wiley Blackwell, vol. 10(3), pages 517-24, August.
  12. John F. Helliwell, 1999. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
  13. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
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  17. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
  18. Jacquemin, Alexis & Sapir, Andre, 1988. "International trade and integration of the European Community : An econometric analysis," European Economic Review, Elsevier, vol. 32(7), pages 1439-1449, September.
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  20. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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  22. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(2), pages 284-314, June.
  23. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  24. Boisso, Dale & Ferrantino, Michael, 1997. "Economic Distance, Cultural Distance, and Openness in International Trade : Empirical Puzzles," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 456-484.
  25. Carolyn Evans, 2006. "Border effects and the availability of domestic products abroad," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 211-246, February.
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