IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Internal Trade and Aggregate Productivity

Listed author(s):
  • Jennifer Winter

    (Labour Program, HRSDC)

  • Trevor Tombe

    (Wilfrid Laurier University)

The positive link between international trade and productivity is well established. However, research on magnitude and consequences of internal trade barriers, which inhibit the efficient geographic distribution of production within a country, is limited. Unique data from Canada and China provide an ideal opportunity to measure the magnitude - and effect on productivity - of barriers to internal trade. Using a flexible, micro-founded approach, we find between-province trade costs average 30% in Canada and over 50% in China (net of distance-effects). These costs are even higher under other plausible parameter values. Internal trade costs in both countries are significantly higher in poor regions. We further adapt a new-trade model to estimate the productivity impact of these barriers. Eliminating inter-provincial trade barriers increases productivity by over 15% in the median province and by over 8% for Canada as a whole, accounting for nearly half the productivity gap with the United States. For comparison, we find these benefits are larger than lowering international trade barriers by 20%. Internal trade barriers also account for over 40% of the regional income inequality across provinces. The gains are even larger for China. Further work will investigate the extent to which high internal trade barriers in developing countries contributes to cross-country income and productivity differences.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 314.

in new window

Date of creation: 2012
Handle: RePEc:red:sed012:314
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed012:314. 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: (Christian Zimmermann)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.