Tear Down this Wall: On the Persistence of Borders in Trade (Démolir Ce Mur: À Propos De La Persistance Des Frontières Dans Le Commerce)

26 Pages Posted: 23 Feb 2013

See all articles by Volker Nitsch

Volker Nitsch

Darmstadt University of Technology - Department of Law and Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Nikolaus Wolf

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

Date Written: February 2013

Abstract

Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. Remarkable persistence in intra‐German trade patterns along the former East‐West border suggests that border effects are neither statistical artefacts nor driven by administrative barriers to trade, but arise from economic fundamentals.

Pourquoi est‐ce que les frontières ont encore de l’importance dans les activités économiques? La réunification de l’Allemagne en 1990 a donné l’occasion d’une expérience naturelle unique pour examiner les effets des frontières sur le commerce. Avec la chute du Mur de Berlin, et la formation rapide d’une union économique et politique forte, il y a eu élimination stricte et complète des barrières administratives au commerce entre l’Allemagne de l’Est et l’Allemagne de l’Ouest en un court laps de temps. La persistance remarquable des patterns de commerce intra‐allemands autour de la frontière Est‐Ouest suggère que ces effets de frontières ne sont ni le résultat d’artefacts statistiques ni le résultat de barrières administratives, mais qu’ils émergent de certains facteurs économiques fondamentaux.

JEL Classification: F14, F15

Suggested Citation

Nitsch, Volker and Wolf, Nikolaus, Tear Down this Wall: On the Persistence of Borders in Trade (Démolir Ce Mur: À Propos De La Persistance Des Frontières Dans Le Commerce) (February 2013). Canadian Journal of Economics/Revue canadienne d'économique, Vol. 46, Issue 1, pp. 154-179, 2013, Available at SSRN: https://ssrn.com/abstract=2223048 or http://dx.doi.org/10.1111/caje.12002

Volker Nitsch (Contact Author)

Darmstadt University of Technology - Department of Law and Economics ( email )

Marktplatz 15
Residenzschloss
Darmstadt, 64283
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Nikolaus Wolf

Humboldt University Berlin - Department of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

HOME PAGE: http://www.wiwi.hu-berlin.de/professuren/vwl/wg/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+4420-7852-3512 (Phone)

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