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The impact of new borders on trade: World War I and the economic disintegration of Central Europe

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  • Heinemeyer, Hans Christian

Abstract

This paper investigates the impact of changes in national border demarcation on economic integration. It treats the national breakups in Central Europe due to WWI as a natural experiment, which allows for evaluating the particular effect of new national borders. A gravity model of trade is used to analyze goods-specific trade among Central European regions. The main results are, first, that the treatment effect of new borders is large. Second, decomposing the border effect provides evidence of a 'border before border' for parts of Germany that became separated even before WWI. Third, the analysis indicates a high level of economic integration before WWI among Polish regions that became politically unified only after the war.

Suggested Citation

  • Heinemeyer, Hans Christian, 2006. "The impact of new borders on trade: World War I and the economic disintegration of Central Europe," Discussion Papers 2006/14, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:200614
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    References listed on IDEAS

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    6. Wolf, Nikolaus, 2006. "Was Germany ever united? Borders and domestic trade, 1885 - 1933," Discussion Papers 2006/4, Free University Berlin, School of Business & Economics.
    7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
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    Cited by:

    1. Flynn, Eimear & Kren, Janez & Lawless, Martina, 2021. "Early reactions of EU-UK trade flows to Brexit," Papers WP713, Economic and Social Research Institute (ESRI).

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