Home Bias: How Has It Affected the Border Effects of China’s Trade?

ABSTRACT

This study aimed to analyze the impact of home bias on China’s trade border effects by constructing a pure exchange computable general equilibrium model. The results indicate that the border effects of external import, export, and trade in China are 6.96 times, 4.62 times, and 5.60 times their respective counterparts in interregional trade. On elimination of national bias, the border effects of China’s external import, export, and trade fell by 96.37%, 93.71%, and 95.18%, respectively, while border effects of China’s interregional trade became 8.06%. By eliminating regional bias, the border effects of China’s external imports, exports, and trade decreased by 3.63%, 6.29%, and 4.82%, respectively.

KEYWORDS:

• Border effects
• home bias
• computable general equilibrium model

JEL:

• D58
• F17

Acknowledgement

We thank the anonymous experts for their suggestions.

Disclosure Statement

The authors declare that they have no conflict of interest.

Notes

1. Coeurdacier (2009) expressed typical facts of home bias. According to the article, “People mainly consume domestically produced goods: the home bias in consumption puzzle,” home bias can be expressed as the ratio of trade to total output.

2. The 2012 Input and Output table for the six sectors of China’s 30 provinces (cities, districts) compiled by the Key Laboratory of Regional Sustainable Development Analysis and Simulation, Chinese Academy of Sciences.

3. The website of World Input–Output Table: http://www.wiod.org.

4. The data of 2002 trade flows of nine regions in the world was not shown in this article. Calibration parameter and measure border effects followed the same procedure as those of 2015.

Additional information

Funding

We thank the Agricultural Science and Technology Innovation Program (Project No. ASTIP-IAED-2021-SR-02; ASTIP-IAED-2021-06) 400 and the National Natural Science Foundation of China (Project No. 71761147004).