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Do Borders Really Slash Trade? A Meta-Analysis

Listed author(s):
  • Tomas Havranek
  • Zuzana Irsova

National borders reduce trade, but most estimates of the border effect seem puzzlingly large. We show that major methodological innovations of the last decade combine to shrink the border effect to a one-third reduction in international trade flows worldwide. The border effect varies across regions: it is substantial in emerging countries, but relatively small in OECD countries. For the computation we collect 1,271 estimates of the border effect reported in 61 studies, codify 32 aspects of study design that may influence the estimates, and use Bayesian model averaging to take into account model uncertainty in meta-analysis. Our results suggest that methods systematically affect the estimated border effects. Especially important is the level of aggregation, measurement of internal and external distance, control for multilateral resistance, and treatment of zero trade flows. We find no evidence of publication bias.

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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2015/01.

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Date of creation: Mar 2015
Handle: RePEc:cnb:wpaper:2015/01
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