Border Effects Without Borders: What Divides Japan's Internal Trade?

Abstract

This article identifies a “border” effect in the absence of a border. The finding that trade between east and west Japan is 23.1% to 51.3% lower than trade within both country parts is established despite the absence of an obvious east–west division due to historical borders, cultural differences, or past civil wars. Postwar agglomeration processes, reflected by the contemporaneous structure of Japan's business and social networks, instead of cultural differences, induced by long‐lasting historical shocks, are identified as an explanation for the east–west bias in intra‐Japanese trade.

Economic effects of differences in dialect

“…This intangible border is extremely robust in the Japanese commodity flow data, although the country was never politically divided or substantially segregated along these lines. While dialect differences reduce trade flows across prefectures, the study finds that they are not the underlying reason for this east−west border effect per se, since dialect patterns in Japan follow a general concentric pattern [11].…”

Subnational home market bias in Vietnam: Evidence from enterprise‐level data

“…Combes et al () and Wrona () emphasise the important role of networks in explaining home bias. We control for two types of networks: the number of memberships in business associations ( business network size ) and the number of people with which owners/managers have regular contact ( social network size ).…”

“…The number of headquarter‐plant links and migration flows proxy for business and social networks, respectively. Cultural proximity and thus networks not only contribute to larger prefectural‐block trade, Wrona () also finds that their effects are stronger within each prefectural block.…”

“…Administratively, Japan has 47 prefectures. Wrona () divides Japan into two equal‐sized east and west prefecture blocks and finds a "border" effect in the absence of a border using commodity flow data within and between Japan's 47 prefectures. Assignment into these prefectural blocks is not due to past historical borders or past civil wars (which might affect current trade flows), yet prefectures belonging to the same prefectural block (east or west) trade more with each other.…”

“…Specifically, trade between east and west Japan is 23.1–51.3% lower than within prefectural‐block trade. Wrona attributes the "border" effect to Japan's current dual (east and west) business and social networks traceable to how economic activities agglomerated into an east (Tokyo) and west (Osaka) pattern after the Second World War, and to prefectures' cultural proximity based on "historical dialect data … an outcome of an evolutionary process shaped by past interactions" (Wrona, , p. 1235). The number of headquarter‐plant links and migration flows proxy for business and social networks, respectively.…”