Advanced Search
MyIDEAS: Login to save this paper or follow this series

Can Business and Social Networks Explain the Border Effect Puzzle?

Contents:

Author Info

  • Mayer, Thierry

    (CERAS, France)

  • Pierre-Phillippe Combes
  • Miren Lafourcade

Abstract

McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this paper data on bilateral trade flows between 94 French regions, for 10 industries and 2 years (1978 and 1993) to study the magnitude and variations over time of trade impediments, both distance-related and (administrative) border-related. We focus on assessing the role that business and social networks can play in shaping trade patterns and explaining the border effect puzzle. Using a structural econometric approach, we show that intra-national administrative borders significantly affect trade patterns inside France. The impact is of the same order of magnitude as in Wolf (2000) for trade inside the United States. We show that more than 60\% of these (puzzling) intra-national border effects can be explained by the composition of local labour force in terms of birth place (social networks) and by inter-plants connections (business networks). In addition, controlling for these network effects reduces the impact of transport cost on trade flows by a comparable factor. Thus, business and social networks that help to reduce informational trade barriers are shown to be strong determinants of trade patterns and to explain a large part of the border puzzle.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repec.org/res2003/Mayer.pdf
File Function: full text
Download Restriction: no

Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 150.

as in new window
Length:
Date of creation: 04 Jun 2003
Date of revision:
Handle: RePEc:ecj:ac2003:150

Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Email:
Web page: http://www.res.org.uk/society/annualconf.asp
More information through EDIRC

Related research

Keywords: gravity; border effects; networks;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
  2. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  3. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  4. Mohamed Hedi Bchir & Mathilde Maurel, 2002. "Impacts économiques et sociaux de l'élargissement pour l'Union européenne et la France," Working Papers 2002-03, CEPII research center.
  5. Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie Mathématique et Applications 2000.52, Université Panthéon-Sorbonne (Paris 1).
  6. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
  7. Combes, Pierre-Philippe & Lafourcade, Miren, 2001. "Transport Cost Decline and Regional Inequalities: Evidence from France," CEPR Discussion Papers 2894, C.E.P.R. Discussion Papers.
  8. Nitsch, Volker, 2002. "Border effects and border regions: Lessons from the German unification," HWWA Discussion Papers 203, Hamburg Institute of International Economics (HWWA).
  9. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  10. Maurice Obstfeld and Kenneth Rogoff., 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research (CIDER) Working Papers C00-112, University of California at Berkeley.
  11. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
  12. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
  13. 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.
  14. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
  15. Michel Beine & Agnès Bénassy-Quéré & Estelle Dauchy & Ronald MacDonald, 2002. "The Impact of Central Bank Intervention on Exchange-Rate Forecast Heterogeneity," Working Papers 2002-04, CEPII research center.
  16. David C. Parsley & Shang-Jin Wei, 2000. "Explaining the Border Effect: The Role of Exchange Rate Variability, Shipping Costs, and Geography," NBER Working Papers 7836, National Bureau of Economic Research, Inc.
  17. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  18. Mohamed Hedi Bchir & Yvan Decreux & Jean-Louis Guérin & Sébastien Jean, 2002. "MIRAGE, a Computable General Equilibrium Model for Trade Policy Analysis," Working Papers 2002-17, CEPII research center.
  19. John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 507-22, August.
  20. Carolyn L. Evans & James Harrigan, 2003. "Distance, Time, and Specialization," NBER Working Papers 9729, National Bureau of Economic Research, Inc.
  21. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May.
  22. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  23. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  24. Agnès Chevallier & Deniz Ünal-Kesenci, 2001. "La productivité des industries méditerranéennes," Working Papers 2001-16, CEPII research center.
  25. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
  26. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  27. Antoine Bouët & Lionel Fontagné & Mondher Mimouni & Xavier Pichot, 2001. "Market Access Maps: A Bilateral and Disaggregated Measure of Market Access," Working Papers 2001-18, CEPII research center.
  28. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  29. Huiwen Lai & Daniel Trefler, 2002. "The Gains from Trade with Monopolistic Competition: Specification, Estimation, and Mis-Specification," NBER Working Papers 9169, National Bureau of Economic Research, Inc.
  30. Holger C. Wolf, 1997. "Patterns of Intra- and Inter-State Trade," NBER Working Papers 5939, National Bureau of Economic Research, Inc.
  31. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  32. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 7-46, 04.
  33. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  34. John F. Helliwell, 1997. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
  35. Michel Fouquin & Pascal Morand & Richard Avisse & Gildas Minvielle & Philippe Dumont, 2002. "Mondialisation et régionalisation : le cas des industries du textile et de l'habillement," Working Papers 2002-08, CEPII research center.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecj:ac2003:150. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.