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Is the international border effect larger than the domestic border effect? evidence from U.S. trade
Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual U.S. states to foreign countries and combine it with trade flows within and between U.S. states. After controlling for distance and country size, we find that relative to state-to-state trade, crossing an individual U.S. state's domestic border entails a larger trade barrier than crossing the ...
Estimating Border Effects: The Impact of Spatial Aggregation
Trade data are typically reported at the level of regions or countries and are therefore aggregates across space. In this paper, we investigate the sensitivity of standard gravity estimation to spatial aggregation. We build a model in which symmetric micro regions are aggregated into macro regions. We then apply the model to the large literature on border effects in domestic and international trade. Our theory shows that aggregation leads to border effect heterogeneity. Larger regions or countries are systematically associated with smaller border effects. The reason is that due to spatial ...