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¡ÊÂê̾¡ËPolarized America in Trade: the Border Effect between the Red State and the Blue State
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The political and cultural polarization of the U.S. has been documented recent years, but does it cause any economic disparity in the country? We examine how much does the ``border'' between the Red and Blue States reduce the inter-state trade using the gravity model which is used to detect international borders effects. We find that trade between the Red and Blue States are approximately two-third of the trade within these two areas. This border effect is robust to additional controls and alternative specifications in 2007 data, while not so robustly confirmed in 1990s. The strongest border effect in 2007 suggests that the recent polarization in American politics and culture may have negatively impacted to the economic connection.

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