Endogenous Borders? Exploring a Natural Experiment on Border Effects

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Endogenous Borders? Exploring a Natural Experiment on Border Effects

Author Info

Heinemeyer, Hans Christian
Schulze, Max Stephan
Wolf, Nikolaus

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Abstract

A large literature documents the impact of borders on trade. However, in all these studies border effects are identified from cross-sectional variation alone. We do not know the "treatment effect" of borders nor can we rule out reverse causation. Here, we exploit the border changes imposed across Europe by the peace treaties in 1919-20 as a natural experiment. We estimate the effects of borders on trade with a difference in difference approach and find that the "treatment effects" of borders are significantly smaller than the pure cross-sectional effects. We show that this is related to ethno-linguistic networks. Borders shape trade, and trade shapes borders.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6909.

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Date of creation: Jul 2008
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Handle: RePEc:cpr:ceprdp:6909

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration
N13 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: Pre-1913
N14 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: 1913-

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-07-30 (All new papers)
NEP-IFN-2008-07-30 (International Finance)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Nikolaus Wolf, 2008. "Was Germany ever United? Evidence from Intra- and International Trade 1885 - 1933," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Other versions:
- Nikolaus Wolf, 2008. "Was Germany Ever United? Evidence from Intra- and International Trade 1885-1933," CEP Discussion Papers dp0870, Centre for Economic Performance, LSE. [Downloadable!]
- Wolf, Nikolaus, 2008. "Was Germany Ever United? Evidence from Intra- and International Trade, 1885 -1933," CEPR Discussion Papers 6796, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Wolf, Nikolaus, 2008. "Was Germany ever united? Evidence from Intra- and International Trade 1885 – 1933," The Warwick Economics Research Paper Series (TWERPS) 871, University of Warwick, Department of Economics. [Downloadable!]
- Wolf, Nikolaus, 2009. "Was Germany Ever United? Evidence from Intra- and International Trade, 1885?1933," The Journal of Economic History, Cambridge University Press, vol. 69(03), pages 846-881, September. [Downloadable!]

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