Gross Product, Population Distribution and Heterogeneity of Border Effects in Gravity Models of Trade

Jason Query ()
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Jason Query: College of Business and Economics, Western Washington University

Open Economies Review, 2024, vol. 35, issue 3, No 6, 605-621

Abstract: Abstract In this paper, I estimate a gravity model that provides strong evidence that border effects are heterogeneous by region and test for the presence of the spatial attenuation effect and international market access costs. I introduce GDP, importer population density, and importer metropolitan statistical area count as determinants of the border effect. I find the strong and robust result that border effects are decreasing in the GDP of the importing and exporting region: a 10% increase in importer GDP results in a 3.24% to 3.67% increase in international trade relative to domestic trade while a 10% increase in exporter GDP results in an increase in international trade relative to domestic trade by between 2.41% and 2.68%. These results are robust to a variety of specifications and indicate the existence of the spatial attenuation effect. However, this paper finds no indication of market access costs differing significantly when trade crosses the U.S.-Canada border.

Keywords: Border effect; Market size; Trade; Heterogeneity; Population density; F10; F14 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11079-022-09679-1

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