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

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  • Yener Kandogan

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    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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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp821.pdf
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    Bibliographic Info

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

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

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    Keywords: Gravity models; integration; disintegration;

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    1. 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.
    2. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
    3. Toshihiro Okubo, 2003. "The Border Effect in the Japanese Market: A Gravity Model Analysis," Working Papers 494, Research Seminar in International Economics, University of Michigan.
    4. 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.
    5. Simeon Djankov & Caroline Freund, 1998. "Disintegration," International Finance Discussion Papers 618, Board of Governors of the Federal Reserve System (U.S.).
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    7. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    8. 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.
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    10. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
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    12. Carolyn L. Evans, 2001. "Border effects and the availability of domestic products abroad," Staff Reports 127, Federal Reserve Bank of New York.
    13. 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.
    14. Harrigan, James, 1996. "Openness to trade in manufactures in the OECD," Journal of International Economics, Elsevier, vol. 40(1-2), pages 23-39, February.
    15. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
    16. Angela Cheptea, 2010. "Border Effects and East-West Integration," Working Papers SMART - LERECO 10-15, INRA UMR SMART.
    17. 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.
    18. ANDRZEJ CIEŚLIK, 2005. "Location Of Foreign Firms And National Border Effects: The Case Of Poland," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 96(3), pages 287-297, 07.
    19. 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.
    20. Djankov, Simeon & Freund, Caroline, 2000. "Disintegration and trade flows : evidence from the Former Soviet Union," Policy Research Working Paper Series 2378, The World Bank.
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