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Do state borders matter for U.S. intranational trade? The role of history and internal migration

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  • The authors are grateful for helpful comments from two anonymous referees and Jennifer Hunt. The authors thank Holger Wolf for sharing his state-to-state distance data. We also thank Nathan Balke, Charles Engel, Tom Fomby, Russell Hillberry, Essie Massoumi, Hiranya Nath, Stephen Smith, as well as seminar participants at SMU, the Southeastern Economic Theory and International Trade Conference, and the Texas Camp Econometrics for helpful comments and suggestions. Email: tosang@mail.smu.edu

Abstract

Abstract.  Empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds. This paper examines the empirical relevance of state borders in U.S. interstate trade for various specifications of the gravity equation. We find a large and economically significant subnational border effect for some specifications. However, two model specifications drastically reduce (if not eliminate) the border effect: (i) dynamic panel specifications controlling for past levels of trade and (ii) models conditioning on internal migration.

Abstract

Les résultats empiriques de l'analyse des impacts des frontières sur les flux de commerce international en utilisant les modèles de gravité sont devenus monnaie courante. Ce texte examine l'impact des frontières entre états à l'aide de cette technique. Il s'avère que les effets de frontières infranationales sont grands et significatifs pour certaines spécifications du modèle. Cependant, deux spécifications du modèle réduisent dramatiquement (s'ils n'éliminent pas) l'effet de frontière: (i) des spécifications qui prennent en compte les niveaux antérieurs de commerce, et (ii) des spécifications qui dépendent de la migration interne.

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