Regional Boundary Effect

Base on Chinese market situation and the existing border effect literatures, this paper argues that China's regional border effect exists for two main reasons:Trade control among regions (such as tariffs or local protection) and products similarities in different regions, or homogeneous (when the homogeneity with similar products inter-or intra-regions is high, local residents will be inclined to buy local products which increases the border effect). First, this article summarize past literatures of the border effect, local protectionism and market integration respectively, then add local protection variables and intra-industry trade indices into the Gravity Model to measure the border effect.In this way, on the one hand we can measure the level of domestic market's integration; on the other hand we can make policy recommendations. This article is structured as follows:ChapterⅠ, Review of the Literature. Review of the international literature of academic and empirical research on the border effect, local protection and market integration. Summarize the outcome of theoretical and empirical research;ChapterⅡ, Introduction of research methods, particularly empirical model and data;ChapterⅢ, Measurement of border effect when considering local protection and intra-industry trade;ChapterⅣ, Summary of the basic conclusions and policy recommendations.