Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade

Federal Reserve Bank of St. Louis Working Paper No. 2009-057B

24 Pages Posted: 13 Nov 2009 Last revised: 2 Jul 2011

See all articles by Cletus C. Coughlin

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division

Dennis Novy

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); Centre for Economic Performance (CEP); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 3 versions of this paper

Date Written: May 31, 2011

Abstract

Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to state trade, crossing an individual U.S. state’s domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.

Keywords: International Border Effects, Intranational Home Bias, Domestic Borders, Gravity, Trade Costs

JEL Classification: F10, F15

Suggested Citation

Coughlin, Cletus C. and Novy, Dennis, Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade (May 31, 2011). Federal Reserve Bank of St. Louis Working Paper No. 2009-057B. Available at SSRN: https://ssrn.com/abstract=1505480 or http://dx.doi.org/10.2139/ssrn.1505480

Cletus C. Coughlin (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Dennis Novy

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 (0) 2476150046 (Phone)

HOME PAGE: http://www2.warwick.ac.uk/fac/soc/economics/staff/faculty/novy/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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