@techreport{NBERw14938,
 title = "Estimating the Border Effect: Some New Evidence",
 author = "Gita Gopinath and Pierre-Olivier Gourinchas and Chang-Tai Hsieh and Nicholas Li",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14938",
 year = "2009",
 month = "April",
 URL = "http://www.nber.org/papers/w14938",
 abstract = {To what extent do national borders and national currencies impose costs that segment markets across countries? To answer this question we use a dataset with product level retail prices and wholesale costs for a large grocery chain with stores in the U.S. and Canada. We develop a model of pricing by location and employ a regression discontinuity approach to estimate and interpret the border effect. We report three main facts: 1) The median absolute retail price and whole-sale cost discontinuity between adjacent stores on either side of the U.S.-Canada border is as high as 21%. In contrast, within-country border discontinuity is close to 0%; 2) The variation in the retail price gap at the border is almost entirely driven by variation in wholesale costs, not by variation in markups; 3) The border gap in prices and costs co-move almost one to one with changes in the U.S.-Canada nominal exchange rate. We show these facts suggest that the price gaps we estimate provide only a lower bound on border costs.},
}