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Is the Border Effect an Artefact of Geographic Aggregation?

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Author Info

  • Carlos Llano

    (Universidad Autónoma de Madrid)

  • Asier Minondo

    (Universidad de Deusto-ESTE)

  • Francisco Requena

    (Universidad de Valencia)

Abstract

The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographic concentration. In order to do so we combine international flows with intranational flows data characterised by a high geographic grid. At this fine grid, intranational flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra-national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split into interprovincial and inter-national flows, we find that the border effect is reduced substantially and even becomes statistically not different from zero in some estimations.

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Bibliographic Info

Paper provided by Department of Economics, University of Sussex in its series Working Paper Series with number 1210.

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Date of creation: Oct 2010
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Handle: RePEc:sus:susewp:1210

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Keywords: border effect; distance; interregional trade; international trade; Spanish provinces;

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References

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  1. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  2. 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.
  3. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412 National Bureau of Economic Research, Inc.
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Cited by:
  1. Cletus C. Coughlin & Dennis Novy, 2013. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from US Trade," CESifo Economic Studies, CESifo, vol. 59(2), pages 249-276, June.
  2. Diaz-Lanchas, Jorge & Llano, Carlos & Zofío, José Luis, 2013. "Trade margins, transport cost thresholds and market areas: Municipal freight flows and urban hierarchy," Working Papers in Economic Theory 2013/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  3. Aitor Garmendia & Carlos Llano & Asier Minondo & Francisco Requena, 2011. "Networks and the disappearance of the intranational home bias," Working Papers 1124, Department of Applied Economics II, Universidad de Valencia.

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