Border Effects and Border Regions: Lessons from the German Unification
25 Pages Posted: 3 Feb 2003
Date Written: 2002
This paper examines data on trade flows between West German Bundeslander (federal states) and East Germany to explore the effect of national borders on trade. Although the data covers only a small fraction of intra-German trade flows, I find a home bias of about factor 2.2; West German shipments to East Germany are about 120% larger than deliveries to an otherwise similar foreign country. Based on this result, possible implications for border regions are discussed.
Keywords: home bias, intranational trade, gravity regression, unification
JEL Classification: F14, F15
Suggested Citation: Suggested Citation