A large literature on "border effects" in the wake of McCallum (1995) documents the massive impact of borders on trade. However, all these studies suffer from an identification problem. "Border effects" are usually identified from cross-sectional variation alone. We do not know how trade would...

A large literature documents the impact of borders on trade. However, in all these studies border effects are identified from cross-sectional variation alone. We do not know the "treatment effect" of borders nor can we rule out reverse causation. In this paper we exploit the border changes...