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Do Borders Really Slash Trade? A Meta-Analysis

Author

Listed:
  • Tomas Havranek

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
    Czech National Bank)

  • Zuzana Irsova

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)

Abstract

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 bor- der 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. Espe- cially 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.

Suggested Citation

  • Tomas Havranek & Zuzana Irsova, 2015. "Do Borders Really Slash Trade? A Meta-Analysis," Working Papers IES 2015/03, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2015.
    • Handle: RePEc:fau:wpaper:wp2015_03
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5248/lang/cs
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    JEL classification:

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

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