Intra-national Trade Costs: Measurement and Aggregation

Abstract

We develop and apply a procedure to flexibly estimate intra-national border barriers and intra-regional trade costs.Bilateral border barriers very significantly depress Canadian inter-provincial trade for some pairs, though the overall effect is rather small.Bilateral distance imposes much larger interprovincial trade costs.Contiguity between provinces accounts for little.Intra-regional trade cost variation affects relative bilateral costs and trade flows, and alters comparative statics except in a neutral case rejected by the data.Consistent trade cost aggregation procedures are developed and applied for groups of regions and/or sectors.

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