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Road Connectivity and the Border Effect: Evidence from Europe

  • Mauro Pisu
  • Henrik Braconier

Several studies have reported a large negative effect of national borders on the volume of trade. We provide new estimates of the border effect for continental Europe using road rather than great circle – or “as-crows-fly” – distance. Road distances for 48 180 European city pairs have been extracted from Bing Maps Routing Services. As our dataset also has information on travel time, we are able to consider costs related to time in addition to those depending on distance. We find that for the same great circle distance and the same city size, the road distance between two cities located in the same country is around 10% shorter than that between cities located in different ones. Travel speed is also higher between cities in the same country. We find that by using measures based on the actual road distance rather than the great circle distance, the negative effect of international borders on goods trade in a standard gravity equation is lowered by around 15%. Time-related trade costs account for an additional 10% reduction in the border effect. Overall these results point to the importance of road networks – and road transport policy in general – to enhance market integration.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2013/2013-06.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 2013-06.

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Date of creation: 2013
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Handle: RePEc:not:notgep:13/06
Contact details of provider: Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/gep/index.aspx

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  1. Chen, Natalie, 2002. "Intra-national versus International Trade in the European Union: Why do National Borders Matter?," CEPR Discussion Papers 3407, C.E.P.R. Discussion Papers.
  2. Alain de Serres & Peter Hoeller & Christine de la Maisonneuve, 2001. "The Width of the Intra-European Economic Borders," OECD Economics Department Working Papers 304, OECD Publishing.
  3. 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.
  4. Bougheas, Spiros & Demetriades, Panicos O. & Morgenroth, Edgar L. W., 1999. "Infrastructure, transport costs and trade," Journal of International Economics, Elsevier, vol. 47(1), pages 169-189, February.
  5. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  6. 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.
  7. Carolyn L. Evans, 2001. "Border effects and the availability of domestic products abroad," Staff Reports 127, Federal Reserve Bank of New York.
  8. Carolyn L. Evans, 2003. "The Economic Significance of National Border Effects," American Economic Review, American Economic Association, vol. 93(4), pages 1291-1312, September.
  9. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  10. Carolyn L. Evans & James Harrigan, 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium," American Economic Review, American Economic Association, vol. 95(1), pages 292-313, March.
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