Working Paper: NBER ID: w15960
Authors: Jenny C. Aker; Michael W. Klein; Stephen A. O'Connell; Muzhe Yang
Abstract: Do national borders and ethnicity contribute to market segmentation between and within countries? This paper uses unique and high-frequency data on narrowly-defined goods to gauge the extent to which a national border impedes trade between developing countries (Niger and Nigeria). Using a regression discontinuity approach, we find a significant price change at the national border, but one that is lower in magnitude than that found for industrialized countries. Yet unlike that literature, and in line with important characteristics of African economies, we investigate the role of ethnicity in mitigating and exacerbating the border effect. We find that a common ethnicity is linked to lower price dispersion across countries, yet ethnic diversity creates an internal border within Niger. The primary mechanism behind the internal border effect appears to be related to the role of ethnicity in facilitating access to credit in rural markets.
Keywords: Borders; Ethnicity; Trade; Market Segmentation; Agricultural Economics
JEL Codes: O1; Q1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Common ethnicity across the border (J15) | Price dispersion for millet (P22) |
| Common ethnicity across the border (J15) | Price dispersion for cowpeas (Q11) |
| Different ethnic groups (J15) | Price differences between Hausa and Zarma regions for millet (P22) |
| Different ethnic groups (J15) | Price differences between Hausa and Zarma regions for cowpeas (P22) |
| Common ethnicity across the border (J15) | Trade facilitation (F13) |
| Different ethnic groups (J15) | Transaction costs that hinder trade (F19) |
| International border between Niger and Nigeria (F55) | Price dispersion for millet (P22) |
| International border between Niger and Nigeria (F55) | Price dispersion for cowpeas (Q11) |