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Intra-national versus international trade in the European Union: why do national borders matter?

  • Chen, Natalie

Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of ‘border effects’ among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 63 (2004)
Issue (Month): 1 (May)
Pages: 93-118

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Handle: RePEc:eee:inecon:v:63:y:2004:i:1:p:93-118
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  18. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
  19. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
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