Intra-national home bias: New evidence from the United States commodity flow survey

The economics of domestic market integration

“…The prevalence of within‐country home bias is surprising because trade frictions are expected to be absent between US states, as states are under constitutional protection of inter‐state commerce and share the same currency. Following Wolf, subsequent works have estimated the inter‐state trade flows to infer potential border effects in the US (see Coughlin and Novy, 2013; Hillberry, 2002; Hillberry and Hummels, , 2003, 2008; Martínez‐San Román et al., 2017; Millimet and Osang, 2007; Yilmazkuday, 2012). In comparison to Wolf's estimates of intra‐national trade home bias that range between 3.12 and 4.39 (meaning intra‐state trade is 3.12–4.39 times higher than inter‐state trade), subsequent papers using US data have reported higher (e.g., Hillberry, 2002; Millimet and Osang, 2007) or lower trade bias (e.g., Hillberry and Hummels, 2003, 2008; Martínez‐San Román et al., 2017; Yilmazkuday, 2012).…”

“…Following Wolf, subsequent works have estimated the inter‐state trade flows to infer potential border effects in the US (see Coughlin and Novy, 2013; Hillberry, 2002; Hillberry and Hummels, , 2003, 2008; Martínez‐San Román et al., 2017; Millimet and Osang, 2007; Yilmazkuday, 2012). In comparison to Wolf's estimates of intra‐national trade home bias that range between 3.12 and 4.39 (meaning intra‐state trade is 3.12–4.39 times higher than inter‐state trade), subsequent papers using US data have reported higher (e.g., Hillberry, 2002; Millimet and Osang, 2007) or lower trade bias (e.g., Hillberry and Hummels, 2003, 2008; Martínez‐San Román et al., 2017; Yilmazkuday, 2012). Sub‐national trade patterns in other developed countries have also been carefully examined (see Helliwell and Verdier, 2001, Agnosteva et al., 2019, and Chahrour and Stevens, 2020, for Canada; Combes et al., 2005, for France; Wolf, 2009, for Germany pre‐World War II; Requena and Llano 2010, for Spain).…”

“…There is a burgeoning literature that has studied domestic market integration for different countries. These studies have usually made use of different approaches to measure domestic market integration such as using the gravity trade flow approach to infer about trade impediments (Agnosteva et al., 2019; Bemrose et al., 2020; Chahrour and Stevens, 2020; Hillberry and Hummels, 2008; Helliwell and Verdier, 2001; Martínez‐San Román et al., 2017;Yilmazkuday, 2012; Wolf, 2000), estimating a saving‐investment relationship or the degree of consumption risk‐sharing to infer about domestic capital mobility (Bayoumi and Rose, 1993; Cavaliere et al., 2006; Chan et al., 2011a, 2011b; Helliwell and Mckitrick, 1999; Ho et al., 2010, 2015; Wang, 2016), and studying the “law of one price” (LOP) to infer about price convergence (Ceglowski, 2003; Elberg, 2016; Lan and Sylwester, 2010; O'Connell and Wei, 2002; Parsley and Wei, 1996).…”

A trade hierarchy of cities based on transport cost thresholds

“…The lack of highly granular micro-data on inter-regional trade flows deters empirical analyses on why trade agglomerations occur in some places and not in others within a country. 1 Since the first empirical and seminal studies (Hillberry & Hummels, 2003;Wolf, 1997Wolf, , 2000 up to more recent works (Andresen, 2010;Capello et al, 2018b;Martínez-San Román et al, 2017), there is a growing literature pointing out an internal home-bias effect as, inter alia, one of the key determinants of the location of economic activity within countries and intra-national trade agglomerations.…”

“…The causes and explanations for this intra-country effect are multiple. Whereas some studies focus on historical and cultural barriers to trade (Capello et al, 2018a;Nitsch & Wolf, 2013;Tubadji & Nijkamp, 2015;Wrona, 2018), hub-and-spoke structures (Gallego et al, 2015), transportmode competitions within a country (Llano et al, 2017), or even the impediments raised by business networks (Garmendia et al, 2012), others emphasize unexpected increases in the internal border effect over the last decades (Crafts & Klein, 2014;Martínez-San Román et al, 2017). Not only these empirical factors but also prominent theoretical setups have been cited to ascribe the internal home-bias effect either to the fragmentation of global production chains in areas near international borders (Yi, 2010) or to spatial frictions between cities (Behrens et al, 2017).…”