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The impact of new borders on trade: World War I and the economic disintegration of Central Europe

  • Heinemeyer, Hans Christian

This paper investigates the impact of changes in national border demarcation on economic integration. It treats the national breakups in Central Europe due to WWI as a natural experiment, which allows for evaluating the particular effect of new national borders. A gravity model of trade is used to analyze goods-specific trade among Central European regions. The main results are, first, that the treatment effect of new borders is large. Second, decomposing the border effect provides evidence of a “border before border” for parts of Germany that became separated even before WWI. Third, the analysis indicates a high level of economic integration before WWI among Polish regions that became politically unified only after the war.

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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2006/14.

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Date of creation: 2006
Date of revision:
Handle: RePEc:zbw:fubsbe:200614
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  1. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(2), pages 284-314, June.
  2. Enrico Spolaore & Alberto Alesina & Romain Wacziarg, 2000. "Economic Integration and Political Disintegration," American Economic Review, American Economic Association, vol. 90(5), pages 1276-1296, December.
  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  4. Wolf, Nikolaus, 2005. "Path dependent border effects: the case of Poland's reunification (1918-1939)," Explorations in Economic History, Elsevier, vol. 42(3), pages 414-438, July.
  5. Jan Fidrmuc & Jarko Fidrmuc, 2003. "Disintegration and Trade," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 811-829, November.
  6. 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.
  7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  8. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  9. Russell Hillberry & David Hummels, 2002. "Intra-national Home Bias: Some Explanations," NBER Working Papers 9022, National Bureau of Economic Research, Inc.
  10. Wolf, Nikolaus, 2006. "Was Germany ever united? Borders and domestic trade, 1885 - 1933," Discussion Papers 2006/4, Free University Berlin, School of Business & Economics.
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