Since the Age of Discovery, the world has grown integrated economically while remaining disintegrated politically as a collection of nation states. The nation-state system is robust because borders, as state dividers, interact with economic integration to absorb shocks. We build a tractable...

Almost Ideal gravity associates zero trade flows with variable and fixed trade cost variation in a flexible demand system. Latent trade shares between non-partners are inferred from the Tobit estimator applied to trade among 75 countries and 25 sectors in 2006. Latent Trade Bias (LTB) is the...