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

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    Cited by:

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    2. 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.
    3. 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.
    4. Jones, Jonathan & Serwicka, Ilona & Wren, Colin, 2018. "Economic integration, border costs and FDI location: Evidence from the fifth European Union enlargement," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 193-205.
    5. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," ARTNeT Working Papers 94, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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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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