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Explaining National Border Effects in the Quad Food Trade

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Author Info
Olper, Alessandro
Raimondi, Valentina

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Abstract

Starting from a theoretically consistent gravity model, this paper first provides estimates of bilateral ‘border effects’ in food trade among Quad countries (Canada, USA, Japan and EU) at the ISIC 4-digit level. Then, it investigates the underlying reasons of border effect, assessing the role played by policy barriers (tariffs and non-tariff barriers) with respect to barriers unrelated to trade policy, such as information related costs and cultural proximity. In contrast with several previous findings, we show that policy barriers are part of the story in explaining the strong trade reduction effect induced by national borders, and this is especially true when we control for the endogeneity of trade policy to imports, as suggested by political economy arguments. Moreover, our results show that elements linked to cultural proximity and consumer preference for home goods, matter a great deal in explaining the magnitude of border effects. The trade reduction effect induced by these policy-unrelated components are from 1.5 to 3 times larger than that induced by policy barriers. These results have implications for the economic and welfare significance of national borders.

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Paper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25467.

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Date of creation: 2006
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Handle: RePEc:ags:iaae06:25467

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Keywords: border effect; food trade; market access; gravity; QUAD countries; International Relations/Trade; F13; F14; Q17;

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  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February. [Downloadable!] (restricted)
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  8. Disdier, Anne-Célia & Mayer, Thierry, 2005. "Je T'aime, Moi Non Plus: Bilateral Opinions and International Trade," CEPR Discussion Papers 4928, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, vol. 66(1), pages 1-29, May. [Downloadable!] (restricted)
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  12. Lionel Fontagné & Thierry Mayer & Soledad Zignago, 2005. "Trade in the Triad: how easy is the access to large markets?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1401-1430, November. [Downloadable!] (restricted)
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  13. Ray, Edward John, 1981. "The Determinants of Tariff and Nontariff Trade Restrictions in the United States," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 105-21, February. [Downloadable!] (restricted)
  14. Wagner, Don & Head, Keith & Ries, John, 2002. "Immigration and the Trade of Provinces," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 507-25, December. [Downloadable!] (restricted)
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  18. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  19. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May. [Downloadable!] (restricted)
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  20. Olper, Alessandro & Raimondi, Valentina, 2005. "Access to OECD Agricultural Market: A Gravity Border Effect Approach," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24543, European Association of Agricultural Economists. [Downloadable!]
  21. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May. [Downloadable!] (restricted)
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  1. Disdier, Anne-Celia & Fontagne, Lionel, 2008. "Trade Impact of European Measures on GMOs Condemned by the WTO Panel," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44392, European Association of Agricultural Economists. [Downloadable!]
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