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Tear down this wall: on the persistence of borders in trade

Author

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  • Nitsch, Volker
  • Wolf, Nikolaus

Abstract

Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. Remarkable persistence in intra-German trade patterns along the former East-West border suggests that border effects are neither statistical artefacts nor driven by administrative barriers to trade, but arise from economic fundamentals.

Suggested Citation

  • Nitsch, Volker & Wolf, Nikolaus, 2013. "Tear down this wall: on the persistence of borders in trade," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 62237, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:62237
    DOI: 10.1111/caje.12002
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/62237/
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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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