Estimating border effects: the impact of spatial aggregation
Cletus C. Coughlin and Dennis Novy
Trade data are typically aggregated across space. In this article, we investigate the sensitivity of gravity estimation to spatial aggregation. We build a model in which micro regions are aggregated into macro regions. We then apply the model to the large literature on border effects in domestic and international trade. Our theory shows that aggregation leads to border effect heterogeneity. Larger regions and countries are systematically associated with smaller border effects. We test our theory with aggregate and industry-level trade flows for U.S. states. Our results confirm the model's predictions, with strong heterogeneity patterns. ? (2021) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
1 November 2021
International Economic Review 62(4) , pp.1453-1487, 2021
https://onlinelibrary.wiley.com/doi/10.1111/iere.12520
This Journal article is published under the centre's Trade programme.