Border Effects Before and After 9/11: Panel Data Evidence Across Industries

We build a unique industry-level panel data set to estimate border effects with respect to U.S.-Canada trade for each year from 1992 to 2005. Estimates from data aggregated at the province/state level yield border effects in the early 1990s that increase slightly and then decline after the implementation of the North American Free Trade Agreement (NAFTA), but significantly increase after 2001. Results based on three digit NAICS level data reveal higher border effects in the early 1990s and considerable heterogeneity across industries. These results imply that the tragic events of 9/11 had considerable adverse impacts for U.S.-Canada trade.