Borders, Ethnicity and Trade

47 Pages Posted: 10 May 2010 Last revised: 12 Aug 2010

See all articles by Jenny C. Aker

Jenny C. Aker

Tufts University - The Fletcher School of Law and Diplomacy; Center for Global Development

Michael W. Klein

Tufts University - The Fletcher School of Law and Diplomacy; National Bureau of Economic Research (NBER)

Stephen A. O'Connell

Swarthmore College - Economics Department; University of Oxford - Centre for Study of African Economics

Muzhe Yang

Lehigh University - Department of Economics

Date Written: May 2010

Abstract

Do national borders and ethnicity contribute to market segmentation between and within countries? This paper uses unique and high-frequency data on narrowly-defined goods to gauge the extent to which a national border impedes trade between developing countries (Niger and Nigeria). Using a regression discontinuity approach, we find a significant price change at the national border, but one that is lower in magnitude than that found for industrialized countries. Yet unlike that literature, and in line with important characteristics of African economies, we investigate the role of ethnicity in mitigating and exacerbating the border effect. We find that a common ethnicity is linked to lower price dispersion across countries, yet ethnic diversity creates an internal border within Niger. The primary mechanism behind the internal border effect appears to be related to the role of ethnicity in facilitating access to credit in rural markets.

Suggested Citation

Aker, Jenny C. and Klein, Michael W. and O'Connell, Stephen A. and Yang, Muzhe, Borders, Ethnicity and Trade (May 2010). NBER Working Paper No. w15960. Available at SSRN: https://ssrn.com/abstract=1601711

Jenny C. Aker (Contact Author)

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

Michael W. Klein

Tufts University - The Fletcher School of Law and Diplomacy ( email )

Medford, MA 02155
United States
617-627-2718 (Phone)
617-627-3712 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stephen A. O'Connell

Swarthmore College - Economics Department ( email )

Swarthmore, PA 19081
United States
610-328-8107 (Phone)
610-328-7352 (Fax)

HOME PAGE: http://www.swarthmore.edu/SocSci/soconne1/

University of Oxford - Centre for Study of African Economics

Wellington Square
Oxford OX1 3JP
United Kingdom

Muzhe Yang

Lehigh University - Department of Economics ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

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