Traders,courts, and the border effect puzzle |
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| Authors: | Alessandro Turrini Tanguy van Ypersele |
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| Institution: | 1. TIMI Study Group, Division of Cardiovascular Medicine, Brigham and Women''s Hospital, Harvard Medical School, Boston, MA, USA;2. Department of Environmental Health, Exposure, Epidemiology, and Risk Program, Harvard School of Public Health, Boston, MA, USA;3. Department of Geography and Environmental Development, Ben-Gurion University of the Negev, Beer Sheva, Israel;1. College of Economics, Rikkyo University, 3-34-1 Nishi-ikebukuro, Toshima, Tokyo 171-8501, Japan;2. Center for Far Eastern Studies, University of Toyama, 3190, Gofuku, Toyama 930-8555, Japan;1. The Fletcher School and Department of Economics, Tufts University, USA;2. The Fletcher School, Tufts University, USA;3. Department of Economics, Swarthmore College, USA;4. Department of Economics, Lehigh University, USA;1. Harvard Business School, Morgan 293, Boston, MA 02163, United States;2. NBER, United States;3. Department of Economics, George Washington University, 2115 G ST, NW, #367, Washington, DC 20052, United States |
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| Abstract: | Although there is mounting empirical evidence that the mere presence of borders contribute to reduce trade significantly, there is no firm view on what are the reasons underlying this phenomenon. This paper investigates the role played by asymmetries in judicial systems in driving the “border effect”. First, we provide evidence that differences in the judicial system matter for the volume of trade flows. Variables capturing the extent of asymmetries in the procedures to settle trade litigations perform significantly in estimation both across OECD countries and across French regions. Second, we develop a matching model of trade showing that such asymetries in the legal system fragment trade through a mechanism which is essentially different compared with that of transport costs or formal trade barriers. |
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