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

University of Nottingham, GEP Research Paper 2009/29

36 Pages Posted: 2 Dec 2009 Last revised: 18 Jan 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: November 30, 2009

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 data set of exports from individual U.S. states to foreign countries and combine it with trade flows within and between U.S. states. After controlling distance and country/state size, we find that relative to state-to-state trade, crossing an individual U.S. state’s domestic border entails a larger trade barrier than crossing the international U.S. border. This finding highlights the concentration of trade flows at the local level and the importance of factors such as informational barriers and transportation costs even for the relatively short distances associated with state-to-state trade.

Keywords: International border effects, intranational home bias, domestic borders, gravity, trade costs

JEL Classification: F1, 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 (November 30, 2009). University of Nottingham, GEP Research Paper 2009/29. Available at SSRN: https://ssrn.com/abstract=1515606 or http://dx.doi.org/10.2139/ssrn.1515606

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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