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Is the Border Effect an Artefact of Geographic Aggregation?

Author

Listed:
  • Carlos Llano

    (Universidad Autónoma de Madrid)

  • Asier Minondo

    (Universidad de Deusto-ESTE)

  • Francisco Requena

    (Universidad de Valencia)

Abstract

The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographic concentration. In order to do so we combine international flows with intranational flows data characterised by a high geographic grid. At this fine grid, intranational flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra-national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split into interprovincial and inter-national flows, we find that the border effect is reduced substantially and even becomes statistically not different from zero in some estimations.

Suggested Citation

  • Carlos Llano & Asier Minondo & Francisco Requena, 2010. "Is the Border Effect an Artefact of Geographic Aggregation?," Working Paper Series 1210, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:1210
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    File URL: http://www.sussex.ac.uk/economics/documents/wps12-2010/pdf
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    Cited by:

    1. Cletus C. Coughlin & Dennis Novy, 2013. "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from US Trade," CESifo Economic Studies, CESifo Group, vol. 59(2), pages 249-276, June.
    2. Groizard, José Luis & Marques, Helena & Santana, María, 2014. "Islands in trade: Disentangling distance from border effects," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-46.
    3. F. Bavaud & M. Kordi & C. Kaiser, 2018. "Flow autocorrelation: a dyadic approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(1), pages 95-111, July.
    4. Tang, Chenghui & Qiu, Peng & Dou, Jianmin, 2022. "The impact of borders and distance on knowledge spillovers — Evidence from cross-regional scientific and technological collaboration," Technology in Society, Elsevier, vol. 70(C).
    5. Garmendia, Aitor & Llano, Carlos & Minondo, Asier & Requena, Francisco, 2012. "Networks and the disappearance of the intranational home bias," Economics Letters, Elsevier, vol. 116(2), pages 178-182.
    6. Wang, Chenglong & Liu, Hui & Zhang, Mengtian & Wei, Zongcai, 2018. "The border effect on urban land expansion in China: The case of Beijing-Tianjin-Hebei region," Land Use Policy, Elsevier, vol. 78(C), pages 287-294.
    7. Nuria Gallego & Carlos Llano, 2014. "The Border Effect and the Nonlinear Relationship between Trade and Distance," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1016-1048, November.
    8. Saileshsingh Gunessee & Cheng Zhang, 2022. "The economics of domestic market integration," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1069-1095, September.
    9. Víctor Martín & Asier Minondo, 2019. "The Convergence In Product‐Level Relative Productivity Across Provinces," Bulletin of Economic Research, Wiley Blackwell, vol. 71(2), pages 180-194, April.
    10. repec:prg:jnlpep:v:preprint:id:635:p:1-20 is not listed on IDEAS
    11. Jorge Díaz-Lanchas & José Luis Zofío & Carlos Llano, 2022. "A trade hierarchy of cities based on transport cost thresholds," Regional Studies, Taylor & Francis Journals, vol. 56(8), pages 1359-1376, August.
    12. Paniagua, Jordi & Korzynski, Pawel & Mas-Tur, Alicia, 2017. "Crossing borders with social media: Online social networks and FDI," European Management Journal, Elsevier, vol. 35(3), pages 314-326.
    13. Ádám Márkus, 2018. "Disappearing Borders in the Visegrad Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(2), pages 149-168.
    14. Török, Ádám & Konka, Boglárka, 2019. "Eukleidész és a magyar regionális fejlődés. Válaszcikk Lengyel Imre-Varga Attila tanulmányára és kutatási javaslatok [Euclid and Hungarian regional development. A response to the study of Imre Leng," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 713-722.
    15. Jacint Balaguer & Jordi Ripollés, 2018. "Revisiting the importance of border effect in sub‐national regions. Evidence from a quasi‐experimental design," Papers in Regional Science, Wiley Blackwell, vol. 97(4), pages 1113-1130, November.
    16. Márquez-Ramos , Laura, 2016. "Regionalism, subnational variation and gravity: A four-country tale," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 35, pages 7-36.
    17. Diaz-Lanchas, Jorge & Llano, Carlos & Zofío, José Luis, 2013. "Trade margins, transport cost thresholds and market areas: Municipal freight flows and urban hierarchy," Working Papers in Economic Theory 2013/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
    18. Bensassi, Sami & Márquez-Ramos, Laura & Martínez-Zarzoso, Inmaculada & Suárez-Burguet, Celestino, 2015. "Relationship between logistics infrastructure and trade: Evidence from Spanish regional exports," Transportation Research Part A: Policy and Practice, Elsevier, vol. 72(C), pages 47-61.
    19. James LeSage & Carlos Llano-Verduras, 2014. "Forecasting spatially dependent origin and destination commodity flows," Empirical Economics, Springer, vol. 47(4), pages 1543-1562, December.

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    More about this item

    Keywords

    border effect; distance; interregional trade; international trade; Spanish provinces;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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