European integration, FDI and the geography of French trade.
This paper uses an augmented gravity model to investigate whether the 1978-2000 process of European integration has changed the geography of trade within France, with a particular focus on the trends experienced by border regions. We support the conclusion that, once controlled for bilateral distance, origin- and destination-specific characteristics, French border regions trade on average 72% more with nearby countries than predicted by the gravity norm. They perform even better (114%) if they have good cross-border transport connections to the neighboring country. However, this outperformance eroded drastically for the French border regions located at the periphery of Europe throughout integration. We show that this trend is partly due to a decreasing propensity of foreign affliates to trade with their home country. This trade reorientation is less pronounced for the Belgian-Luxembourgian and German firms located in the regions which have better access to the EU core.
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