Aggregation bias, compositional change, and the border effect

Russell Hillberry

Canadian Journal of Economics, 2002, vol. 35, issue 3, 517-530

Abstract: Borders affect the composition, not only the level, of interregional trade. In disaggregated U.S. Commodity Flow data, border effects vary substantially across commodities. Substantial border-induced compositional change suggests the possibility that standard estimates suffer from aggregation bias arising from endogenous industry location patterns and the presence of zero observations in commodity-level trade. Adjusting for these effects reduces the estimate of the aggregate border effect from 20.9 to 5.7.

JEL-codes: F14 F15 (search for similar items in EconPapers)
Date: 2002
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