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Networks and the disappearance of the intranational home bias

Author

Listed:
  • Aitor Garmendia

    (Deusto Business School)

  • Carlos Llano

    (Universidad Autónoma de Madrid)

  • Asier Minondo

    (Deusto Business School)

  • Francisco Requena

    (Universidad de Valencia)

Abstract

Previous studies have shown that, not only countries, but also regions have a preference to trade within their administrative borders. Using unique trade flows data, we also find a large home bias in Spanish intranational trade. However, we show that this home bias disappears once we take into account the higher density of social and business networks within regions than between regions. We also find that the home bias does not disappear if intranational trade flows are measured in quantity rather than value. This fact might explain why previous studies on other European countries still find an intranational home bias, even when network effects are taken into account.

Suggested Citation

  • Aitor Garmendia & Carlos Llano & Asier Minondo & Francisco Requena, 2011. "Networks and the disappearance of the intranational home bias," Working Papers 1124, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:1124
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    home bias; state borders; intranational trade; networks; business groups; Spain;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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