Border Effects on firm's productivity: The role of peripherality and territorial capital

Abstract

Border effects have long been studied and are a central element of EU regional policies. While most literature takes a macroeconomic approach, this paper adopts a microeconomic one, studying the impact on firm productivity in border areas. The empirical analysis, on Italian land borders, employs a novel two-phases double-matching design, which considers firm-level characteristics as well as the territorial capital of municipalities where they locate. Results suggest that border effects are not limited to territories close to the border but affect larger areas. Furthermore, they are significant and negative in urban areas, while they are insignificant in peripheral areas which are characterized by low accessibility and territorial capital endowment.