IDEAS home Printed from https://ideas.repec.org/p/fip/fednsr/127.html
   My bibliography  Save this paper

Border effects and the availability of domestic products abroad

Author

Listed:
  • Carolyn L. Evans

Abstract

Borders have a sizable negative impact on trade flows. Given the vast number of individual goods potentially traded, this "border effect" could have two possible explanations: (1) less international than domestic trade in the goods that are actually traded between countries ("flow"), or (2) differences between the sets of goods traded internationally and domestically--that is, fewer goods are available as exports than are sold in the home market ("availability"). Most of the previous literature on border effects has ignored the possible role of this second factor, instead reporting a single border effect that contains the embedded assumption that identical sets of goods are available in the domestic and export markets. In contrast to this assumption, evidence on the activities of firms shows that only a fraction of domestic products are actually exported. ; This paper provides theoretical and empirical work that incorporates the distinction between the flow and availability explanations of border effects. A model that includes heterogeneous fixed costs of trade illustrates how either of these two factors could underlie a given border effect. The empirical work incorporates the fact that not all firms export by examining only the fraction of total domestic production attributable to those firms that actually do sell abroad. The results suggest that a portion of the border effect is indeed due to differences between the sets of goods available domestically and internationally. I find that, on average across industries, about one-half of the border effect is due to the flow explanation, while the remaining half may be attributed to availability. Given that the policy and welfare implications of border effects depend on the relative importance of these two explanations, future work should take care to specify clearly which aspect of the border effect is being measured.

Suggested Citation

  • Carolyn L. Evans, 2001. "Border effects and the availability of domestic products abroad," Staff Reports 127, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:127
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr127.html
    Download Restriction: no

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr127.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, May.
    2. Russell H. Hillberry, 2002. "Aggregation bias, compositional change, and the border effect," Canadian Journal of Economics, Canadian Economics Association, vol. 35(3), pages 517-530, August.
    3. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
    4. Andrew B. Bernard & J. Bradford Jensen, 1999. "Exporting and Productivity," NBER Working Papers 7135, National Bureau of Economic Research, Inc.
    5. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
    6. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    7. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
    8. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    9. John F. Helliwell, 1997. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
    10. Harrigan, James, 1996. "Openness to trade in manufactures in the OECD," Journal of International Economics, Elsevier, vol. 40(1-2), pages 23-39, February.
    11. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    12. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
    13. Carolyn L. Evans, 2003. "The Economic Significance of National Border Effects," American Economic Review, American Economic Association, vol. 93(4), pages 1291-1312, September.
    14. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cletus C. Coughlin & Dennis Novy, 2013. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from US Trade," CESifo Economic Studies, CESifo, vol. 59(2), pages 249-276, June.
    2. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    3. Kei-Mu Yi, 2005. "Vertical specialization and the border effect puzzle," Working Papers 05-24, Federal Reserve Bank of Philadelphia.
    4. Tamara Mata & Carlos Llano, 2013. "Social networks and trade of services: modelling interregional flows with spatial and network autocorrelation effects," Journal of Geographical Systems, Springer, vol. 15(3), pages 319-367, July.
    5. Mauro Pisu & Henrik Braconier, 2013. "Road Connectivity and the Border Effect: Evidence from Europe," Discussion Papers 2013-06, University of Nottingham, GEP.
    6. Shan (Victor) Jiang, "undated". "Immigration, Information, and Trade Margins," Working Papers 2007-16, Department of Economics, University of Calgary, revised 31 Oct 2007.
    7. Cafiso, Gianluca, 2007. "The Geographic Space in International Trade: from Gravity to New Economic Geography," MPRA Paper 20269, University Library of Munich, Germany.
    8. M. Manchin & AM. Pinna, 2003. "Border effects in the enlarged EU area," Working Paper CRENoS 200301, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    9. Liu, Xiaoyun & Whalley, John & Xin, Xian, 2010. "Non-tradable goods and the border effect puzzle," Economic Modelling, Elsevier, vol. 27(5), pages 909-914, September.
    10. Ghazalian, Pascal L. & Furtan, W. Hartley, 2008. "The effects of multinational activities on the measurement of home bias," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 401-416, September.
    11. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May.
    12. Kei-Mu Yi, 2010. "Can Multistage Production Explain the Home Bias in Trade?," American Economic Review, American Economic Association, vol. 100(1), pages 364-393, March.
    13. Hans-Christian Heinemeyer & Max-Stephan Schulze & Nikolaus Wolf, 2008. "Endogenous Borders? The Effects of New Borders on Trade in Central Europe 1885-1933," CESifo Working Paper Series 2246, CESifo Group Munich.
    14. Heinemeyer, Hans Christian & Schulze, Max Stephan & Wolf, Nikolaus, 2008. "Endogenous Borders? Exploring a Natural Experiment on Border Effects," CEPR Discussion Papers 6909, C.E.P.R. Discussion Papers.
    15. Nitsch, Volker, 2002. "Border effects and border regions: Lessons from the German unification," HWWA Discussion Papers 203, Hamburg Institute of International Economics (HWWA).
    16. Zhiqi Chen & Horatiu A. Rus & Anindya Sen, 2016. "Border Effects Before and After 9/11: Panel Data Evidence Across Industries," The World Economy, Wiley Blackwell, vol. 39(10), pages 1456-1481, October.
    17. Chunlai Chen & Jun Yang & Christopher Findlay, 2008. "Measuring the Effect of Food Safety Standards on China’s Agricultural Exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(1), pages 83-106, April.
    18. Yener Kandogan, 2006. "Falling Walls and Lifting Curtains: Analysis of Border Effects in Transition Countries," William Davidson Institute Working Papers Series 821, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    Exports ; International trade ; International economic integration;

    JEL classification:

    • F1 - International Economics - - Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:127. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber). General contact details of provider: http://edirc.repec.org/data/frbnyus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.