Regional Borders and Trade in Asia

48 Pages Posted: 4 Oct 2013 Last revised: 6 Apr 2017

See all articles by Woong Lee

Woong Lee

Korea Institute for International Economic Policy

Chankwon Bae

Korea Institute for International Economic Policy

Date Written: August 28, 2013

Abstract

This paper investigates the effect of regional borders on trade in Asia. The regional borders define the three regions of Asia: South, Southeast, and East Asia. Regional trade indicates the flows of trade within a region, whereas regional border trade means trade across regions. A gravity model is augmented with the region dummies to estimate the regional border effects that capture any and all time-invariant factors promoting or impeding regional trade. The main finding is that regional border effects are asymmetric on the three regions in Asia: There is a large and significant regional border effect on South Asia, small on Southeast Asia, and negligibly negative on East Asia. The significant and positive regional border effect in South Asia suggests that countries share intrinsic factors facilitating trade between countries in this region. Although the regional border effect of Southeast Asia is positive, its magnitude shows little difference between its regional trade and regional border trade. Finally, the estimate on East Asia presents a completely different picture from the actual data. It implies that there exist some factors leading to active regional border trade between East Asia and other Asian regions.

Keywords: Border Effect, Regional Borders, Natural Trading Partners, Gravity Model, Asia

JEL Classification: F13, F14, F15

Suggested Citation

Lee, Woong and Bae, Chankwon, Regional Borders and Trade in Asia (August 28, 2013). KIEP Research Paper. Working Papers 13-03. Available at SSRN: https://ssrn.com/abstract=2335905 or http://dx.doi.org/10.2139/ssrn.2335905

Woong Lee (Contact Author)

Korea Institute for International Economic Policy ( email )

Seoul 137-602

Chankwon Bae

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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