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Subnational Income Growth and International Border Effects

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Listed:
  • Hanna L. Adam
  • Mario Larch
  • David Stadelmann

Abstract

This paper analyses the effect of international borders and of trade agreements at international borders on subnational (i.e. regional) growth. We construct an extensive panel dataset covering 1,350 regions in 86 countries worldwide between 1950 and 2017. Our results show that international borders decrease regional income per capita, while trade agreements at international borders increase regional income per capita by about the same magnitude. The positive marginal effect of trade agreements on regional income corresponds to at least three fifths of the negative marginal effect of international borders. Thus, trade agreements can compensate negative border effects and explain regional inequalities within countries. An array of robustness tests supports our interpretations.

Suggested Citation

  • Hanna L. Adam & Mario Larch & David Stadelmann, 2021. "Subnational Income Growth and International Border Effects," CESifo Working Paper Series 9100, CESifo.
  • Handle: RePEc:ces:ceswps:_9100
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    More about this item

    Keywords

    border effects; trade; trade agreements; GDP per capita; regional analysis;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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