Description:
This paper examines data on trade flows between West German Bundesländer (federal states) and East Germany to explore the effect of national borders on trade. Although the data cover only a small fraction of intra-German trade flows, I find a home bias of about factor 2.2; West German shipments to East Germany are about 120% larger than deliveries to an otherwise similar foreign country. Based on this result, possible implications for border regions are discussed