This paper exploits spatial quasiexperimental variation around French departmental borders to provide novel evidence that regional borders disturb surrounding economic activity; namely, commuting flows, catchment areas, and residential density. The lack of integration of local transport networks at regional borders—leading to a 4.5 km travel distance penalty when crossing borders—explains the observed border effects. Using a spatial quantifiable equilibrium framework and accounting for construction costs, a policy simulation exercise shows that integrating local transport networks leads to a 6.36% average growth in real per capita residential income.

This paper exploits the historical system of salt taxation in France to study the impact of extractive taxes on long-term economic development. Salt tax rates exhibited significant spatial variation, leading to discontinuous jumps in salt prices. Adopting a spatial regressiondiscontinuity design, we estimate the causal effect of the tax using original historical data. We extract geo-localized individual-level information on almost 70 million individuals living near tax borders between 1400 and 1900. These exogenous rate differentials had large effects, as areas burdened by lower rates exhibit higher economic development. These effects emerged after the tax’s introduction and persisted post-abrogation to the present day.