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Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade

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  • Cletus C. Coughlin
  • Dennis Novy

Abstract

Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state’s domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2853.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2853

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Keywords: international border; intranational home bias; domestic border; gravity; trade costs; concentration;

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Cited by:
  1. Crafts, Nicholas & Klein, Alexander, 2013. "Geography and Intra-National Home Bias: U.S. Domestic Trade in 1949 and 2007," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 112, Competitive Advantage in the Global Economy (CAGE).
  2. Delina E. Agnosteva & James E. Anderson & Yoto V. Yotov, 2014. "Intra-national Trade Costs: Measurement and Aggregation," NBER Working Papers 19872, National Bureau of Economic Research, Inc.
  3. Andrew J. Cassey, 2010. "Analyzing the export flow from Texas to Mexico," Staff Papers, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Oct.
  4. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  5. Gabriel Felbermayr & Jasmin Gröschl, 2011. "Within US Trade and the Long Shadow of the American Secession," Ifo Working Paper Series Ifo Working Paper No. 117, Ifo Institute for Economic Research at the University of Munich.
  6. Coughlin, Cletus C., 2014. "The great trade collapse and rebound: a state-by-state view," Review, Federal Reserve Bank of St. Louis, vol. 96(1), pages 13-33.
  7. Markus Eberhardt & Zheng Wang & Zhihong Yu, 2014. "From One to Many Central Plans: Drug Advertising Inspections and Intra-National Protectionism in China," CESifo Working Paper Series 4682, CESifo Group Munich.
  8. Flora Bellone & Kozo Kiyota & Toshiyuki Matsuura & Patrick Musso & Lionel Nesta, 2012. "International Productivity Gaps and the Export Status of Firms: Evidence from France and Japan," GREDEG Working Papers, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis 2012-07, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis, revised Jan 2014.
  9. Davide Castellani & Giulio Giangaspero & Antonello Zanfei, 2013. "Heterogeneity and distance. Some propositions on how differences across regions, firms and functions affect the role of distance in FDI location decisions," Working Papers, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini 1308, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  10. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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