The Economics of Cross-Border Travel
University of Toronto - Rotman School of Management
University of British Columbia (UBC) - Division of Strategy and Business Economics
Mariano E. Tappata
University of British Columbia - Sauder School of Business, Strategy and Business Economics Division
April 4, 2013
We model the decision to travel across an international border as a trade-off between benefits derived from buying a range of products at lower prices and the costs of travel. Using micro-data on Canada-US travel, we structurally estimate this model. Price differences motivate cross-border travel; a 10% home appreciation raises the propensity to cross by 8% to 26%. The larger elasticity arises when the home currency is strong, a result predicted by the model. Distance to the border strongly inhibits crossings, with an implied cost of 87 cents/mile. Geographic differences can partially explain why American travel is less exchange-rate responsive.
Number of Pages in PDF File: 42
Date posted: December 9, 2010 ; Last revised: April 7, 2013
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