Is the Border Effect an Artefact of Geographical Aggregation?

Carlos Llano · Asier Minondo · Francisco Requena Silvente

30 citations0/0 files storedWorld Economy

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Global trade and economics International Business and FDI Regional Economics and Spatial Analysis

Abstract

Abstract The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographical concentration. To do so, we combine international flows with intra‐national flows data characterised by a high geographical grid. At this fine grid, intra‐national flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra‐national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split into inter‐provincial and inter‐national flows, we find that the border effect is reduced substantially and even becomes statistically not different from zero in some estimations.

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References

2003Gravity with Gravitas: A Solution to the Border Puzzle 2006The Log of Gravity 2008Estimating Trade Flows: Trading Partners and Trading Volumes *2008Distorted Gravity: The Intensive and Extensive Margins of International Trade 2000The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?1995National Borders Matter: Canada-U.S. Regional Trade Patterns.1997The Regionalization of the World Economy 2001Business and Social Networks in International Trade

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2022The impact of borders and distance on knowledge spillovers — Evidence from cross-regional scientific and technological collaboration 2014The Border Effect and the Nonlinear Relationship between Trade and Distance 2017International Trade and Coordination

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