A Robust Solution for the Canada--United States Border Puzzle

Martin A. Andresen

The International Trade Journal, 2013, vol. 27, issue 2, 142-155

Abstract: The border effect states that Canadian provinces trade substantially more with other provinces than the United States after controlling for economic size and distance. This border effect is listed as one of the six puzzles of international economics and has spawned a plethora of research investigating its existence, magnitude, and, most recently, a solution. This article investigates this solution in order to determine if it is robust. After identifying possible economic and statistical mis-specification, the solution is shown to be robust. Therefore, the border effect is reduced to a reasonable magnitude, but it also changes its sign to become consistent with expectations.

Date: 2013
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DOI: 10.1080/08853908.2013.764249

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