National Border Effects: Location, Not Nationality, Matters
A recent literature documents the downward impact of national borders on trade. This paper probes the relative importance of two potential sources of border effects: (1) pure locational factors, such as transport costs and tariffs; and (2) an inherent disadvantage for a firm selling in a foreign market. I am able to make this decomposition by using data on the local sales of foreign affiliates of US multinational enterprises, on US bilateral exports, and on domestic sales by host-country firms. The "border effect" arises almost entirely from locational factors. If a firm establishes and sells from a subsidiary located in the foreign country, its local sales are about on a par with those of domestic firms in that market. Copyright © 2007 The Author; Journal compilation © 2007 Blackwell Publishing Ltd.
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Volume (Year): 15 (2007)
Issue (Month): 2 (05)
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