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Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade

  • Cletus C. Coughlin
  • Dennis Novy

Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state's domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1162.

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Date of creation: Sep 2012
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Handle: RePEc:cep:cepdps:dp1162
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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