Tear Down this Wall: On the Persistence of Borders in Trade
Volker Nitsch and
Nikolaus Wolf
No 332021, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project
Abstract:
Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade both in the cross-section and over time. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. The evolution of intraGerman trade flows after reunification then provides new insights for both the globalization and border effects literatures. Our estimation results show a remarkable persistence in intra-German trade patterns along the former East-West border; political integration is not rapidly followed by economic integration. Instead, we estimate that it takes at least one generation (between 33 and 40 years or more) to remove the impact of political borders on trade. This finding strongly suggests that border effects are neither statistical artefacts nor mainly driven by administrative or “red tape” barriers to trade, but arise from economic fundamentals.
Keywords: International Relations/Trade; Political Economy (search for similar items in EconPapers)
Pages: 49
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://ageconsearch.umn.edu/record/332021/files/4760.pdf (application/pdf)
Related works:
Journal Article: Tear down this wall: on the persistence of borders in trade (2013) 
Journal Article: Tear down this wall: on the persistence of borders in trade (2013) 
Working Paper: Tear down this wall: on the persistence of borders in trade (2013) 
Working Paper: Tear Down this Wall: On the Persistence of Borders in Trade (2009) 
Working Paper: Tear Down this Wall: On the Persistence of Borders in Trade (2009) 
Working Paper: Tear Down this Wall: On the Persistence of Borders in Trade (2009) 
Working Paper: Tear Down this Wall: On the Persistence of Borders in Trade (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332021
Access Statistics for this paper
More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().