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Endogenous Borders? Exploring a Natural Experiment on Border Effects

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  • Wolf, Nikolaus
  • Schulze, Max-Stephan
  • Heinemeyer, Hans Christian

Abstract

A large literature documents the impact of borders on trade. However, in all these studies border effects are identified from cross-sectional variation alone. We do not know the "treatment effect" of borders nor can we rule out reverse causation. Here, we exploit the border changes imposed across Europe by the peace treaties in 1919-20 as a natural experiment. We estimate the effects of borders on trade with a difference in difference approach and find that the "treatment effects" of borders are significantly smaller than the pure cross-sectional effects. We show that this is related to ethno-linguistic networks. Borders shape trade, and trade shapes borders.

Suggested Citation

  • Wolf, Nikolaus & Schulze, Max-Stephan & Heinemeyer, Hans Christian, 2008. "Endogenous Borders? Exploring a Natural Experiment on Border Effects," CEPR Discussion Papers 6909, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6909
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    References listed on IDEAS

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    Cited by:

    1. Wolf, Nikolaus, 2008. "Was Germany ever united? Evidence from Intra- and International Trade 1885 – 1933," The Warwick Economics Research Paper Series (TWERPS) 871, University of Warwick, Department of Economics.
    2. Kathryn E. Gary & Cristina Victoria Radu, 2019. "The impact of border changes and protectionism on real wages in early modern Scania," Working Papers 0166, European Historical Economics Society (EHES).
    3. Keller, Wolfgang & Shiue, Carol, 2013. "The Trade Impact of the Zollverein," CEPR Discussion Papers 9387, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Border effects; Treatment effects; European history;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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