U.S. economy still divided by the Civil War

An analysis published in Economic Inquiry (ungated here) by two German economists finds that the Southern secession still has a noticable impact on trade within the U.S.: The former border between the Union and the Confederation is still relevant to- day: The defunct border represents a trade barrier that lowers trade between US states by ...

By , a former associate editor at Foreign Policy.
ERIK PEREL/AFP/Getty Images)
ERIK PEREL/AFP/Getty Images)
ERIK PEREL/AFP/Getty Images)

An analysis published in Economic Inquiry (ungated here) by two German economists finds that the Southern secession still has a noticable impact on trade within the U.S.:

The former border between the Union and the Confederation is still relevant to-
day: The defunct border represents a trade barrier that lowers trade between US
states by on average 7 to 20 percent. In a million placebo estimations, we find
supportive evidence that the magnitude of this border effect is unique. The re-
sult is robust to using alternative waves of the Commodity Flow Survey, to differ-
ent econometric methods, or to the inclusion of Western states or the rest of the
world. It cannot be substantially attenuated, let alone eliminated, by adding a
vast array of contemporaneous and historical variables that correlate both with
the border dummy and, potentially, also with bilateral trade. 

Of course, there's always a causation question with findings like this. The same regional divisions that contributed to the Civil War may also cause the current gap. (The authors control for a number of these factors, including the prevalence of agriculture and the incidence of slavery.)

An analysis published in Economic Inquiry (ungated here) by two German economists finds that the Southern secession still has a noticable impact on trade within the U.S.:

The former border between the Union and the Confederation is still relevant to-
day: The defunct border represents a trade barrier that lowers trade between US
states by on average 7 to 20 percent. In a million placebo estimations, we find
supportive evidence that the magnitude of this border effect is unique. The re-
sult is robust to using alternative waves of the Commodity Flow Survey, to differ-
ent econometric methods, or to the inclusion of Western states or the rest of the
world. It cannot be substantially attenuated, let alone eliminated, by adding a
vast array of contemporaneous and historical variables that correlate both with
the border dummy and, potentially, also with bilateral trade. 

Of course, there’s always a causation question with findings like this. The same regional divisions that contributed to the Civil War may also cause the current gap. (The authors control for a number of these factors, including the prevalence of agriculture and the incidence of slavery.)

Considering that the former border between East and West Germanywas found to restrict trade by between 26 and 30 percent in 2004, it would be pretty noteworthy if the Civil War still had a smaller but comparable effect more than a century and a half later. 

Joshua Keating was an associate editor at Foreign Policy. Twitter: @joshuakeating

Tag: War

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