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This paper examines data on trade flows between West German Bundeslander (federal states) and East Germany to explore the effect of national borders on trade. Although the data covers only a small fraction of intra-German trade flows, I find a home bias of about factor 2.2; West German shipments...
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. First an augmented gravity model is estimated for mainland and island regions; then a Blinder-Oaxaca decomposition is … applied to the gravity estimation results in order to disentangle the distance and border effects for those regions, net of … all other factors controlled for in the gravity estimations. Results show that island regions are at a substantial …
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identified in a conventionally specified gravity regression. …
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