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Tear down this wall: on the persistence of borders in trade

Authors


  • We thank two anonymous referees and participants at presentations in Barcelona, Gießen, Glasgow, München, Nürnberg, Quebec City, Seoul and Warwick for helpful comments. A more extensive version of this paper was circulated as CEPR Working Paper No. 7545. Financial support from the Fritz-Thyssen-Foundation is gratefully acknowledged. Email: nitsch@vwl.tu-darmstadt.de

Abstract

Abstract Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. Remarkable persistence in intra-German trade patterns along the former East-West border suggests that border effects are neither statistical artefacts nor driven by administrative barriers to trade, but arise from economic fundamentals.

Abstract

Pourquoi est-ce que les frontières ont encore de l’importance dans les activités économiques? La réunification de l’Allemagne en 1990 a donné l’occasion d’une expérience naturelle unique pour examiner les effets des frontières sur le commerce. Avec la chute du Mur de Berlin, et la formation rapide d’une union économique et politique forte, il y a eu élimination stricte et complète des barrières administratives au commerce entre l’Allemagne de l’Est et l’Allemagne de l’Ouest en un court laps de temps. La persistance remarquable des patterns de commerce intra-allemands autour de la frontière Est-Ouest suggère que ces effets de frontières ne sont ni le résultat d’artefacts statistiques ni le résultat de barrières administratives, mais qu’ils émergent de certains facteurs économiques fondamentaux.

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