Borders, Ethnicity and Trade

My stack of reading material is increasing daily.  The latest addition is called “Borders, Ethnicity and Trade” and it is forthcoming in the JDE (click here for an earlier, ungated version).  The paper looks to be really interesting on the topics of geography and ethnicity.  Below is the abstract:

This paper uses unique high-frequency data on prices of two agricultural goods to examine the additional costs incurred in cross-border trade between Niger and Nigeria, as well as trade between ethnically distinct markets within Niger. We find a sharp and significant conditional price change of about 20 to 25 percent between markets immediately across the national border. This price change is significantly lower when markets on either side of the border share a common ethnicity. Within Niger, trade between ethnically distinct regions exhibits an ethnic border effect that is comparable, in its magnitude, to the national border effect between Niger and Nigeria. Our results suggest that having a common ethnicity may reduce the transaction costs associated with agricultural trade, especially the costs associated with communicating and providing credit.

Blood is thicker than tarmac

There’s an interesting NBER working paper this week called “The Value of Democracy: Evidence from Road Building in Kenya.”  The authors find that regions that share the same ethnicity as the president also get favored when it comes to road building.  In the 1963 to 2011 period, these areas get twice as much roadwork funds allocated to them and have four times the amount of paved roads built.

In some sense this is unfortunate but not all that surprising.  What is surprising and hopeful is that this relationship between ethnicity and roads goes away when Kenya has democratic government.

Here is a photo of a road in what must have been a president’s home region:



and here’s one perhaps from an ethnicity not as lucky: