Are national borders are still an impediment to regional trade in Europe? We exploit a rich micro-dataset of shipments of goods by road across 269 European regions, in 24 countries, to construct a matrix of inter-regional trade flows in thirteen manufacturing industries. We estimate the effect of national borders on spatial trade flows following a new identification strategy based on comparing trade across contiguous regions. The existence of a national border between two regions is an impediment to trade similar in magnitude to a 29% bilateral tariff, on average. We explore how much of this border effect may come from the persistence of past borders. We exploit detailed data of European borders since 1910 to test whether all borders matter the same. Our results show that recent borders (established after 1990) have trade-reducing effects today but are weaker than hundred-year old borders. Thus, an important part of the border effect seems to come from contemporaneous political decisions rather than from the persistence of history.
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