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Endogenous Borders? Exploring a Natural Experiment on Border Effects

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Author Info
Heinemeyer, Hans Christian
Schulze, Max Stephan
Wolf, Nikolaus

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Abstract

A large literature documents the impact of borders on trade. However, in all these studies border effects are identified from cross-sectional variation alone. We do not know the "treatment effect" of borders nor can we rule out reverse causation. Here, we exploit the border changes imposed across Europe by the peace treaties in 1919-20 as a natural experiment. We estimate the effects of borders on trade with a difference in difference approach and find that the "treatment effects" of borders are significantly smaller than the pure cross-sectional effects. We show that this is related to ethno-linguistic networks. Borders shape trade, and trade shapes borders.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6909.

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Date of creation: Jul 2008
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Handle: RePEc:cpr:ceprdp:6909

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Related research
Keywords: Border Effects European history treatment effects

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration
N13 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: Pre-1913
N14 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: 1913-

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This page was last updated on 2008-11-7.

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