Journal
CANADIAN JOURNAL OF ECONOMICS-REVUE CANADIENNE D ECONOMIQUE
Volume 35, Issue 3, Pages 517-530Publisher
WILEY
DOI: 10.1111/1540-5982.00143
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Borders affect the composition, not only the level, of interregional trade. In disaggregated US. 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.
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