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

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  • 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 Group Munich.
  • Handle: RePEc:ces:ceswps:_2853
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    References listed on IDEAS

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    Cited by:

    1. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    2. Bellone, Flora & Kiyota, Kozo & Matsuura, Toshiyuki & Musso, Patrick & Nesta, Lionel, 2014. "International productivity gaps and the export status of firms: Evidence from France and Japan," European Economic Review, Elsevier, vol. 70(C), pages 56-74.
    3. Hayakawa, Kazunobu, 2016. "Domestic and international border effects," IDE Discussion Papers 565, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    5. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    6. Nicholas Crafts & Alexander Klein, 2015. "Geography and intra-national home bias: U.S. domestic trade in 1949 and 2007," Journal of Economic Geography, Oxford University Press, vol. 15(3), pages 477-497.
    7. Gabriel Felbermayr & Jasmin Gröschl, 2014. "Within U.S. Trade And The Long Shadow Of The American Secession," Economic Inquiry, Western Economic Association International, vol. 52(1), pages 382-404, January.
    8. Andrew J. Cassey, 2010. "Analyzing the export flow from Texas to Mexico," Staff Papers, Federal Reserve Bank of Dallas, issue Oct.
    9. Jose Rodriguez Mora & David Comerford, 2015. "The Gains from Economic Integration," 2015 Meeting Papers 569, Society for Economic Dynamics.
    10. repec:prg:jnlpep:v:preprint:id:635:p:1-20 is not listed on IDEAS
    11. Gomez-Herrera, Estrella & Martens, Bertin & Turlea, Geomina, 2014. "The drivers and impediments for cross-border e-commerce in the EU," Information Economics and Policy, Elsevier, vol. 28(C), pages 83-96.
    12. Qun Bao & Jiuli Huang & Yanling Wang, 2015. "Productivity and Firms’ Sales Destination: Chinese Characteristics," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 620-637, August.
    13. Delina E. Agnosteva & James E. Anderson & Yoto V. Yotov, 2014. "Intra-national Trade Costs: Measurement and Aggregation," NBER Working Papers 19872, National Bureau of Economic Research, Inc.
    14. Herz, Benedikt & Varela-Irimia, Xosé-Luís, 2016. "Border Effects in European Public Procurement," MPRA Paper 76401, University Library of Munich, Germany, revised 24 Jan 2017.
    15. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    16. Catherine Y. Co & Thu Kim Nguyen & Tung Nhu Nguyen & Que Nguyet Tran, 2017. "The missing middle: Growing and strengthening Viet Nam’s micro, small, and medium-sized enterprises," WIDER Working Paper Series 072, World Institute for Development Economic Research (UNU-WIDER).
    17. Davide Castellani & Giulio Giangaspero & Antonello Zanfei, 2013. "Heterogeneity and distance. Some propositions on how differences across regions, firms and functions affect the role of distance in FDI location decisions," Working Papers 1308, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
    18. Herrmann-Pillath, Carsten & Libman, Alexander & Yu, Xiaofan, 2014. "Economic integration in China: Politics and culture," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 470-492.
    19. Coughlin, Cletus C., 2014. "The great trade collapse and rebound: a state-by-state view," Review, Federal Reserve Bank of St. Louis, vol. 96(1), pages 13-33.
    20. Hayakawa, Kazunobu, 2017. "Domestic and international border effects: The cases of China and Japan," China Economic Review, Elsevier, vol. 43(C), pages 118-126.
    21. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    22. Wrona, Jens, 2015. "Border effects without borders: What divides Japan's internal trade?," DICE Discussion Papers 185, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    23. repec:eee:reveco:v:54:y:2018:i:c:p:193-205 is not listed on IDEAS

    More about this item

    Keywords

    international border; intranational home bias; domestic border; gravity; trade costs; concentration;

    JEL classification:

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

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