Border Effects of Brazilian States

We estimate the degree of trade integration among Brazilian states and calculate the magnitude of the Brazilian states' engagement in international trade in the years 1991, 1997, 1998 and 1999 using the methodology of border effects. We show that the Brazilian market is rather highly fragmented but less than the Chinese market. Brazilian sub-national borders reduced interstate trade by a factor of 23 in 1991 and a factor of 13 in 1999, indicating an ongoing process of domestic integration. International trade integration of Brazilian states increased over the period 1991-1999 in conjunction with the strategy of outward orientation. Border effects differ greatly among Brazilian states : internal and international trade integration is low for Northern Regions (with the exception of Amazonas State) and high for Southern regions, the most domestically integrated states being also those most engaged in international trade.