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...

What are the origins of border effects on trade and why do borders continue to matter in periods of increasing economic integration? We explore the hypothesis that border effects emerged as a result of asymmetric economic integration in the unique historical setting of the multi-national...