Borders, Ethnicity and Trade

Jenny C. Aker, Michael Klein, Stephen A. O'Connell and Muzhe Yang
Authors registered in the RePEc Author Service: Stephen A. O'Connell () and Stephen D. O'Connell

No 15960, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do national borders and ethnicity contribute to market segmentation between and within countries? This paper uses unique and high-frequency data on narrowly-defined goods to gauge the extent to which a national border impedes trade between developing countries (Niger and Nigeria). Using a regression discontinuity approach, we find a significant price change at the national border, but one that is lower in magnitude than that found for industrialized countries. Yet unlike that literature, and in line with important characteristics of African economies, we investigate the role of ethnicity in mitigating and exacerbating the border effect. We find that a common ethnicity is linked to lower price dispersion across countries, yet ethnic diversity creates an internal border within Niger. The primary mechanism behind the internal border effect appears to be related to the role of ethnicity in facilitating access to credit in rural markets.

JEL-codes: O1 Q1 (search for similar items in EconPapers)
Date: 2010-05
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as Aker, Jenny C. & Klein, Michael W. & O'Connell, Stephen A. & Yang, Muzhe, 2014. "Borders, ethnicity and trade," Journal of Development Economics, Elsevier, vol. 107(C), pages 1-16.

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