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Borders, Ethnicity and Trade

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  • Jenny C. Aker
  • Michael W. Klein
  • Stephen A. O'Connell
  • Muzhe Yang

Abstract

Do national borders and ethnicity contribute to market segmentation between and within countries? This paper uses unique and high-frequency data on narrowly-defined goods to gauge the extent to which a national border impedes trade between developing countries (Niger and Nigeria). Using a regression discontinuity approach, we find a significant price change at the national border, but one that is lower in magnitude than that found for industrialized countries. Yet unlike that literature, and in line with important characteristics of African economies, we investigate the role of ethnicity in mitigating and exacerbating the border effect. We find that a common ethnicity is linked to lower price dispersion across countries, yet ethnic diversity creates an internal border within Niger. The primary mechanism behind the internal border effect appears to be related to the role of ethnicity in facilitating access to credit in rural markets.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15960.

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Date of creation: May 2010
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Handle: RePEc:nbr:nberwo:15960

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  1. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  2. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Technical Working Papers 0337, National Bureau of Economic Research, Inc.
  3. Gopinath, Gita & Gourinchas, Pierre-Olivier & Hsieh, Chang-Tai & Li, Nicholas, 2009. "Estimating the Border Effect: Some New Evidence," CEPR Discussion Papers 7281, C.E.P.R. Discussion Papers.
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Cited by:
  1. Bruno Versailles, 2012. "Market Intergration and Border Effects in Eastern Africa," CSAE Working Paper Series 2012-01, Centre for the Study of African Economies, University of Oxford.
  2. Bruno Versailles, 2012. "Market Integration and Border Effects in Eastern Africa," Economics Series Working Papers WPS/2012-01, University of Oxford, Department of Economics.
  3. WALTHER Olivier, 2012. "Regional trade and economic networks in West Africa," CEPS/INSTEAD Working Paper Series 2012-07, CEPS/INSTEAD.

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