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Let There Be Light: Trade and the Development of Border Regions

Author

Listed:
  • Marius BRÜLHART

    (FERDI)

  • Olivier CADOT

    (Faculté des hautes études commerciales - Université de Lausanne)

  • Alexander HIMBERT

    (University of Lausanne)

Abstract

Does international trade help or hinder the economic development of border regions relative to interior regions? Theory tends to suggest that trade helps, but it can also predict the reverse. The question is policy relevant as regions near land borders are generally poorer, and sometimes more prone to civil conflict, than interior regions. We therefore estimate how changes in bilateral trade volumes affect economic activity along roads running inland from international borders, using satellite night-light measurements for 2,186 border-crossing roads in 138 countries. We observe a significant ‘border shadow’: on average, lights are 37 percent dimmer at the border than 200 kilometers inland. We find this difference to be reduced by trade expansion as measured by exports and instrumented with tariffs on the opposite side of the border. At the mean, a doubling of exports to a particular neighbor country reduces the gradient of light from the border by some 23 percent. This qualitative finding applies to developed and developing countries, and to rural and urban border regions. Proximity to cities on either side of the border amplifies the effects of trade. We provide evidence that local export-oriented production is a significant mechanism behind the observed effects.

Suggested Citation

  • Marius BRÜLHART & Olivier CADOT & Alexander HIMBERT, 2019. "Let There Be Light: Trade and the Development of Border Regions," Working Papers P251, FERDI.
    • Handle: RePEc:fdi:wpaper:4785
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    References listed on IDEAS

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    Cited by:

    1. Hanna L. Adam & Mario Larch & David Stadelmann, 2023. "Trade agreements and subnational income of border regions," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 1034-1052, October.
    2. Felbermayr, Gabriel J. & Tarasov, Alexander, 2022. "Trade and the spatial distribution of transport infrastructure," Journal of Urban Economics, Elsevier, vol. 130(C).
    3. Brülhart, Marius & Desmet, Klaus & Klinke, Gian-Paolo, 2020. "The shrinking advantage of market potential," Journal of Development Economics, Elsevier, vol. 147(C).
    4. Hanna L. Adam & Mario Larch & David Stadelmann, 2021. "Subnational Income Growth and International Border Effects," CESifo Working Paper Series 9100, CESifo.

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    More about this item

    Keywords

    Trade liberalization; border regions; economic geography; night lights data;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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