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Over the last 20 years the border-effect literature repeatedly documented the trade-reducing effect of inter- and intra-national borders. Thereby, the sheer size and persistence of observed border effects from the beginning raised doubts on the genuine effect of underlying borders. However, when so-called "border effects" result either from statistical artefacts or from differences in fundamentals, why should their spatial dimension then inevitably coincide with the geography of present or past political borders? This paper identifies a discontinuous trade reduction along a geographic dimension that neither existing nor defunct political borders can explain. Trade between the East and the West of Japan is 23.1% - 51.3% lower than trade within both country parts. Including a rich set of explanatory variables, suggests that recent agglomeration trends, reflected by the contemporaneous structure of Japan's business and social networks, rather than cultural differences, shaped by long-lasting historical shocks, can explain the east-west bias in intra-Japanese trade.

National borders substantially matter in passenger air traffic. Empirical estimates based upon a new data set on domestic and international departures from German airports indicate that the German border reduces air traffic activity by a factor of four to five. This result adds a further piece of evidence to the significance of border effects in various kinds of economic activity.

SUMMARYThe empirical literature on border effects suggests that national borders substantially reduce the level of economic transactions. This paper adds another piece of evidence to the significance of border effects by applying a new data set which is completely independent of the data sets of previous studies. Our data refer to domestic and international passenger departures from German airports. The econometric results indicate that the German border reduces passenger air traffic by a factor of four to five. This magnitude is in line with the results of previous studies for trade and investment flows.

National borders substantially matter in passenger air traffic. Empirical estimates based upon a new data set on domestic and international departures from German airports indicate that the German border reduces air traffic activity by a factor of four to five. This result adds a further piece of evidence to the significance of border effects in various kinds of economic activity.

This paper presents a new methodology to measure border effects from a different perspective with respect to the standard gravitational approach. The methodology proposed measures supply-side border effects by identifying two types of limits produced by the border to the productive system: inefficiency in exploiting local resources (efficiency needs) and scarce endowment of resources (endowment needs), the former calling for intervention on resource governance, the latter requiring new investment. The methodology, applied to the European Union's Cross Border Cooperation Program regions, suggests a stronger presence of efficiency needs with respect to endowment ones.

A new method for measuring trade potential from border effects is developed and applied to manufactured trade between the old fifteen European Union (EU) members and twelve Central and East European (CEE) economies. Border effects are estimated with three theoretically compatible trade specifications, and much larger trade potentials are obtained than predicted by usual trade potential models. Even after a decade of regional trade liberalization, the integration of CEE and EU economies is two to three times weaker than intra-EU integration, revealing a large potential for East-West European trade.