Intra-National Versus International Trade in the European Union: Why Do National Borders Matter?

35 Pages Posted: 26 Jul 2002

See all articles by Natalie Chen

Natalie Chen

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: June 2002

Abstract

Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of 'border effects' among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.

Keywords: Border effects, EU countries, industries, gravity equation

JEL Classification: F14, F15

Suggested Citation

Chen, Natalie, Intra-National Versus International Trade in the European Union: Why Do National Borders Matter? (June 2002). Available at SSRN: https://ssrn.com/abstract=320383

Natalie Chen (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 8419 (Phone)
+44 24 7652 3032 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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