Borders Matter! - Regional Integration in North America / Grenzen sind bedeutsam! - Regionale Integration Nordamerika

Summary We analyze the spatial interaction among regions in North America and in Western Europe. We use a gravity model extended by a spatial correlation structure where data allows to evaluate the spatial interaction in two dimensions: level of impact and the length of the spatial tail. This allows us to address to effects external to the gravity model: importance of neighboring regions on the respective region and size of the cluster of regions. We find that the methodology employed improves the statistical quality of results and their economic interpretation. We conclude that national borders matter and that the North American regional structure, i.e. its cluster structure, is more polarized in terms of firm and spatial network structure than that of Europe. We argue that this relates to different types of institutional arrangements with effects on the spatial division of labor.