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Traders, courts, and the border effect puzzle

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  • Turrini, Alessandro
  • van Ypersele, Tanguy

Abstract

Although there is mounting empirical evidence that the mere presence of borders contribute to reduce trade significantly, there is no firm view on what are the reasons underlying this phenomenon. This paper investigates the role played by asymmetries in judicial systems in driving the "border effect". First, we provide evidence that differences in the judicial system matter for the volume of trade flows. Variables capturing the extent of asymmetries in the procedures to settle trade litigations perform significantly in estimation both across OECD countries and across French regions. Second, we develop a matching model of trade showing that such asymetries in the legal system fragment trade through a mechanism which is essentially different compared with that of transport costs or formal trade barriers.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 40 (2010)
Issue (Month): 2-3 (May)
Pages: 81-91

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Handle: RePEc:eee:regeco:v:40:y:2010:i:2-3:p:81-91

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Related research

Keywords: Border effect Legal costs Matching;

References

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Citations

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Cited by:
  1. Bengt Söderlund & Patrik Tingvall, 2014. "Dynamic effects of institutions on firm-level exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 150(2), pages 277-308, May.
  2. Aitor Garmendia & Carlos Llano & Asier Minondo & Francisco Requena, 2011. "Networks and the disappearance of the intranational home bias," Working Papers 1124, Department of Applied Economics II, Universidad de Valencia.
  3. Araujo, Luis & Mion, Giordano & Ornelas, Emanuel, 2012. "Institutions and Export Dynamics," CEPR Discussion Papers 8809, C.E.P.R. Discussion Papers.
  4. Heyman, Fredrik & Gustavsson Tingvall, Patrik, 2012. "The Dynamics of Offshoring and Institutions," Ratio Working Papers 190, The Ratio Institute.

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