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Border Effects without Borders

Author

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  • Wrona, Jens
Abstract
Over the last 20 years the border-effect literature repeatedly documented the trade-reducing effect of inter- and intra-national borders. Thereby, the sheer size and persistence of observed border effects from the beginning raised doubts on the genuine effect of underlying borders. However, when so-called "border effects" result either from statistical artefacts or from differences in fundamentals, why should their spatial dimension then inevitably coincide with the geography of present or past political borders? This paper identifies a discontinuous trade reduction along a geographic dimension that neither existing nor defunct political borders can explain. Trade between the East and the West of Japan is 23.1% - 51.3% lower than trade within both country parts. Including a rich set of explanatory variables, suggests that recent agglomeration trends, reflected by the contemporaneous structure of Japan's business and social networks, rather than cultural differences, shaped by long-lasting historical shocks, can explain the east-west bias in intra-Japanese trade.

Suggested Citation

  • Wrona, Jens, 2015. "Border Effects without Borders," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113060, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:113060
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    References listed on IDEAS

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    2. Céline Bonnet & Jan Philip Schain, 2020. "An Empirical Analysis Of Mergers: Efficiency Gains And Impact On Consumer Prices," Journal of Competition Law and Economics, Oxford University Press, vol. 16(1), pages 1-35.
    3. Yilmazkuday, Hakan, 2012. "Understanding interstate trade patterns," Journal of International Economics, Elsevier, vol. 86(1), pages 158-166.
    4. Zouheir El-Sahli & Joakim Gullstrand & Karin Olofsdotter, 2022. "The external effects of offshoring on job security in SMEs," Small Business Economics, Springer, vol. 59(4), pages 1613-1640, December.
    5. Arnarson, Björn Thor & Gullstrand, Joakim, 2016. "Linking Services to Manufacturing Exports," Working Papers 2016:27, Lund University, Department of Economics, revised 24 Feb 2017.
    6. Jens Suedekum, 2018. "Economic effects of differences in dialect," IZA World of Labor, Institute of Labor Economics (IZA), pages 414-414, January.

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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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