Journal Article
No. 2014-40 | November 13, 2014
Islands in Trade: Disentangling Distance from Border Effects
(Published in Special Issue Distance and Border Effects in Economics)


Trade between regions separated by a sea border is affected by specific transport costs that have not been considered by the border effects literature. Among these are the existence of a time barrier, the need to combine different transport modes, or to pay fees and taxes for the use of public infrastructures such as ports and airports. The empirical strategy used to estimate the “island effect” proceeds in two steps: first an augmented gravity model is estimated for mainland and island regions; then a Blinder–Oaxaca decomposition is applied to the gravity estimation results in order to disentangle the distance and border effects for those regions. Results show that island regions are at a substantial disadvantage compared to continental regions, which is due to the higher and non-linear effect of distance coefficients.

Data Set

JEL Classification:

F15, C23


  • Downloads: 2444 (Discussion Paper: 2333)


Cite As

José Luis Groizard, Helena Marques, and María Santana (2014). Islands in Trade: Disentangling Distance from Border Effects. Economics: The Open-Access, Open-Assessment E-Journal, 8 (2014-40): 1–46.

Comments and Questions

Anonymous - islands in trade
November 14, 2014 - 10:16

A very good article,highly incisive,and educative.The authors deserve a very big commendation for contributing to knowledge..

Juan Pablo Zorrilla-Salgador - outermost region
November 14, 2014 - 11:01

A very interesting paper. I like the applied use of the augmented gravity model and the Blinder–Oaxaca decomposition method.

But I think it would be important to note that the "Canary Islands are an outermost region" and the transport costs are higher than the Balearic Islands.

Also, it ...[more]

... would be recommended to change Figure 1 (2003), providing an incorrect picture of the real distance and position from the Canary Islands to the Iberian Peninsula.

Kind regards.