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Networks and the disappearance of the intranational home bias

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  • Garmendia, Aitor
  • Llano, Carlos
  • Minondo, Asier
  • Requena, Francisco

Abstract

Previous studies have shown that, not only countries, but also regions have a preference to trade within their administrative borders. Using unique trade flows data, we also find a large home bias in Spanish intranational trade. However, we show that this home bias tends to disappear once we take into account the higher density of social and business networks within regions than between regions. We also find that the home bias does not disappear if intranational trade flows are measured in quantity rather than value. This fact might explain why previous studies on other European countries still find an intranational home bias, even when network effects are taken into account.

Suggested Citation

  • Garmendia, Aitor & Llano, Carlos & Minondo, Asier & Requena, Francisco, 2012. "Networks and the disappearance of the intranational home bias," Economics Letters, Elsevier, vol. 116(2), pages 178-182.
    • Handle: RePEc:eee:ecolet:v:116:y:2012:i:2:p:178-182
    DOI: 10.1016/j.econlet.2012.02.021
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    More about this item

    Keywords

    Home bias; State borders; Intranational trade; Networks; Business groups; Spain;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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