Gravity Model Specification and the Effects of the Canada-U.S. Border

By Howard J. Wall. 2000

65 citations recorded by the source corpus.

There is a well-established literature finding that the Canada-U.S. border has a large dampening effect on trade, is asymmetric, and differs across provinces. In this paper, I demonstrate that the standard gravity model used to obtain these results provides biased estimates of the volume of trade. I attribute this to heterogeneity bias and reestimate the effects of the border using a gravity model that allows for heterogeneous gravity equations. Doing so does not alter the general results of existing studies, although it does yield a border effect that is 40 percent larger, reverses the border's asymmetry, and indicates very different provincial effects.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/3ec5001f5eca99b3391bc7e9de028fe9331dc713

Citations in the corpus

• Do state borders matter for U.S. intranational tradeq The role of history and internal migration (2007, unknown): “’ The fact that the home bias effect increases is consistent with the results presented in Wall [48] for U.”