{
  "title": "Barriers Within Borders: Internal Trade and Domestic Market Integration",
  "publication": "IMF Working Papers, September 18, 2026",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2026/09/18/barriers-within-borders-internal-trade-and-domestic-market-integration-579509",
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  "summary": "Domestic markets can be far from fully integrated within a country: Canada's interprovincial trade is half the size of its international trade.",
  "authors": [
    "Federico J Diez",
    "Trevor Tombe",
    "Yuanchen Yang"
  ],
  "publishDate": "2026-09-18",
  "series": "IMF Working Papers",
  "sections": [
    {
      "heading": "Summary and scope",
      "content": "- Domestic markets can be far from fully integrated within a country: Canada's interprovincial trade is half the size of its international trade.\n- The paper estimates internal trade costs using bilateral flows across hundreds of products and sectors and decomposes them into geographic and non-geographic components.\n- Estimates are embedded in a multi-region, multi-sector general equilibrium model with input–output linkages and interprovincial migration to assess macroeconomic and distributional effects of removing internal barriers."
    },
    {
      "heading": "Methodology",
      "content": "- Empirical estimation of internal trade costs using bilateral flows across hundreds of products and sectors.\n- Decomposition of estimated internal trade costs into geographic (distance-related) and non-geographic components.\n- Embedding cost estimates in a multi-region, multi-sector general equilibrium model that incorporates:\n  - input–output linkages\n  - interprovincial migration"
    },
    {
      "heading": "Key quantitative results",
      "content": "- Removing all non-distance barriers raises real GDP by 6.8 percent in the baseline scenario.\n- The largest gains accrue to smaller provinces."
    },
    {
      "heading": "Sectoral findings",
      "content": "- Services are identified as the sectors generating the largest liberalization gains."
    },
    {
      "heading": "Dynamics, scenarios, and complementarities",
      "content": "- Sequential provincial liberalization can generate a virtuous cycle: a province's liberalization increases the gains from (and incentives for) subsequent liberalization for most other following provinces.\n- The potential gains from domestic market integration can offset the GDP losses from increases in external trade costs."
    },
    {
      "heading": "Policy implications and takeaways",
      "content": "- Targeting non-distance internal barriers can yield substantial aggregate gains (6.8 percent real GDP in the baseline).\n- Policies that prioritize services liberalization may capture the largest sectoral returns.\n- Coordinated or sequential provincial liberalization can produce positive spillovers, increasing incentives for other provinces to liberalize.\n- Domestic market integration can serve as a buffer against adverse shocks from higher external trade costs.\n\nSource: IMF Working Papers — Federico J Diez, Trevor Tombe, and Yuanchen Yang. \"Barriers Within Borders: Internal Trade and Domestic Market Integration\", Working Paper No. 2026/194, September 18, 2026.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2026/09/18/barriers-within-borders-internal-trade-and-domestic-market-integration-579509"
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    "Authors: Federico J Diez, Trevor Tombe, Yuanchen Yang",
    "Published: September 18, 2026",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229059633.001",
    "Domestic markets can be far from fully integrated within a country: Canada's interprovincial trade is half the size of its international trade.",
    "The paper estimates internal trade costs using bilateral flows across hundreds of products and sectors and decomposes them into geographic and non-geographic components.",
    "Estimates are embedded in a multi-region, multi-sector general equilibrium model with input–output linkages and interprovincial migration to assess macroeconomic and distributional effects of removing internal barriers.",
    "Empirical estimation of internal trade costs using bilateral flows across hundreds of products and sectors.",
    "Decomposition of estimated internal trade costs into geographic (distance-related) and non-geographic components.",
    "Embedding cost estimates in a multi-region, multi-sector general equilibrium model that incorporates:",
    "Removing all non-distance barriers raises real GDP by 6.8 percent in the baseline scenario.",
    "The largest gains accrue to smaller provinces.",
    "Services are identified as the sectors generating the largest liberalization gains.",
    "Sequential provincial liberalization can generate a virtuous cycle: a province's liberalization increases the gains from (and incentives for) subsequent liberalization for most other following provinces.",
    "The potential gains from domestic market integration can offset the GDP losses from increases in external trade costs.",
    "Targeting non-distance internal barriers can yield substantial aggregate gains (6.8 percent real GDP in the baseline).",
    "Policies that prioritize services liberalization may capture the largest sectoral returns.",
    "Coordinated or sequential provincial liberalization can produce positive spillovers, increasing incentives for other provinces to liberalize.",
    "Domestic market integration can serve as a buffer against adverse shocks from higher external trade costs.",
    "**Working Paper**"
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