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

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Listed:
  • Cletus C. Coughlin
  • Dennis Novy

Abstract

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 unique 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.

Suggested Citation

  • Cletus C. Coughlin & Dennis Novy, 2009. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade," CESifo Working Paper Series 2853, CESifo.
    • Handle: RePEc:ces:ceswps:_2853
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    More about this item

    Keywords

    international border; intranational home bias; domestic border; gravity; trade costs; concentration;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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