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Falling Walls and Lifting Curtains: Analysis of Border Effects in Transition Countries

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Author Info
Yener Kandogan ()
Abstract

Since McCallum’s (1995) finding of surprisingly high border effect on trade between US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to accurately measure this effect. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976-2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations.

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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 821.

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Date of creation: 01 Mar 2006
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Handle: RePEc:wdi:papers:2006-821

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Related research
Keywords: Gravity models; integration; disintegration;

Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F15 - International Economics - - Trade - - - Economic Integration
P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Linkages

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  1. Okubo, Toshihiro, 2004. "The border effect in the Japanese market: A Gravity Model analysis," Journal of the Japanese and International Economies, Elsevier, vol. 18(1), pages 1-11, March. [Downloadable!] (restricted)
    Other versions:
  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. [Downloadable!] (restricted)
    Other versions:
  3. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
    Other versions:
  4. Djankov, Simeon & Freund, Caroline, 2000. "Disintegration," CEPR Discussion Papers 2545, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. M. Manchin & Anna Maria Pinna, 2003. "Border effects in the enlarged EU area," Working Paper CRENoS 200301, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Carolyn L. Evans, 2001. "Border effects and the availability of domestic products abroad," Staff Reports 127, Federal Reserve Bank of New York. [Downloadable!]
  9. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  10. Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December. [Downloadable!] (restricted)
  11. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July. [Downloadable!] (restricted)
  12. Djankov, Simeon & Freund, Caroline, 2000. "Disintegration and trade flows : evidence from the Former Soviet Union," Policy Research Working Paper Series 2378, The World Bank. [Downloadable!]
  13. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November. [Downloadable!] (restricted)
  14. Chen, Natalie, 2002. "Intra-national versus International Trade in the European Union: Why do National Borders Matter?," CEPR Discussion Papers 3407, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. 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. [Downloadable!] (restricted)
  16. 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. [Downloadable!] (restricted)
  17. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
  18. Harrigan, James, 1996. "Openness to trade in manufactures in the OECD," Journal of International Economics, Elsevier, vol. 40(1-2), pages 23-39, February. [Downloadable!] (restricted)
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