Border Effects and Trade Dynamics in Interregional Economies
Summary
Border effects describe the reduction in trade flows that arises when goods, services or capital cross administrative boundaries, even within a single country. Such effects reflect a combination of regulatory divergence, institutional frictions and psychological barriers that amplify the impact of transport costs. Interregional trade dynamics are shaped by the interplay between market-accessibility, the distribution of economic activity, and policy-induced fragmentation. Gravity models and central place theory have long underpinned the analysis of spatial trade patterns, emphasising the role of distance, economic mass and transport infrastructure. Recent empirical work has probed how discrete thresholds in transport costs define functional market areas, and how sub-national regulation may reintroduce home bias despite broader integration efforts. Understanding these processes is crucial for designing transport investments, streamlining regulatory regimes and fostering balanced regional development.
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Border Effects and Trade Dynamics in Interregional Economies publication trend
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Technical terms
Border effect: The measurable reduction in trade or economic interaction when administrative boundaries are crossed, beyond what is predicted by distance alone.
Gravity model: A spatial interaction framework that predicts bilateral trade flows based on the economic size of regions and the distance or trade cost separating them.
Home bias: The preference of consumers or firms to trade within their own region, leading to disproportionately higher intra-regional trade volumes.
Transport cost threshold: A specific distance or cost point at which the relationship between trade volume and transport expense changes markedly, indicating a structural break in market reach.
References
- A trade hierarchy of cities based on transport cost thresholds. Regional Studies (2021).
- Accessibility improvement and interregional trade flows. Transportation (2024).
- Market fragmentation and the rise of sub-national regulation. The Annals of Regional Science (2021).
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