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US–Canada border effect between 1993 and 2007: smaller, less asymmetrical, and declining

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  • Hirokazu Ishise
  • Miwa Matsuo

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Abstract

We revisit the US–Canadian border effect on trade from 1993 through 2007. For 1993 data, we find that traditional log-transformed gravity models make the border effect larger, while data construction processes make the border effect smaller . Overall, we find that the border effect in 1993 is 4.1, which is 15–20 % lower than the previous estimates of approximately 5 by Anderson and van Wincoop (Am Econ Rev 93(1):170–192, 2003 ) and Feenstra (Scott J Polit Econ 49(5):491–506, 2002 ). Using the same data construction and specification methodologies, we find that the effect has shrunk to 3.2 by 2007; namely, the border effect in 2007 reduces state-province trade by two-thirds. Thus, between 1993 and 2007, the border effect declined by 22 %. Based on the structural estimator, we also find that the border effect is stronger for Canadian provinces as shown by Anderson and van Wincoop ( 2003 ), but the asymmetry in the border effect between the US and Canada shrank between 1993 and 2007. Copyright Kiel Institute 2015

Suggested Citation

  • Hirokazu Ishise & Miwa Matsuo, 2015. "US–Canada border effect between 1993 and 2007: smaller, less asymmetrical, and declining," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 291-308, May.
  • Handle: RePEc:spr:weltar:v:151:y:2015:i:2:p:291-308
    DOI: 10.1007/s10290-015-0212-2
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    References listed on IDEAS

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    Cited by:

    1. Balaguer, Jacint & Ripollés, Jordi, 2018. "Disentangling the importance of international border effects. Some evidence from Portugal–Spain based on diesel retailers," Economic Modelling, Elsevier, vol. 72(C), pages 260-269.

    More about this item

    Keywords

    Gravity equation; Border effect; Trade barrier asymmetry; US trade after September 11; F10; F15; R10;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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