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The Border Effect and the Nonlinear Relationship between Trade and Distance

Nuria Gallego () and Carlos Llano Verduras

Review of International Economics, 2014, vol. 22, issue 5, 1016-1048

Abstract: The border-effect literature confirms that sub-national units tend to trade more with the rest of their country than with foreign markets. However, it is likely that ongoing processes of trade integration will generate a trade-off between internal and external integration for sub-national units within countries. In this paper we estimate the internal and external border effect, using a novel dataset that captures intra- and international shipments between Spanish regions and regions in eight European countries with alternative treatments of the nonlinear relationship between distance and trade.

Date: 2014
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