Cletus C. Coughlin, Dennis Novy, The CAGE Background Briefing Series No. 59, July 2016

Borders impede trade, and a major objective of research in international trade has been to identify by how much. This column argues that bilateral trade data can give a misleading picture. Larger countries have inherently smaller border effects because their data aggregate over more space and economic activity. Trade economists need to think harder about how slicing up the map at the level of countries drives estimates of important policy variables.

Political Economy