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Chicago Fed Letter, No. 129, May 1998
Interstate Trade among Midwest Economies

If Illinois were an independent country whose Congress was in the process of determining which economies should be granted Most Favored Nation status, the countries shown in the top part of figure 1 would be the prime candidates, assuming Illinois adopted a policy of maximizing self-interest. However, if the set of potential candidates were expanded to include states, the entries in the bottom half of figure 1 would offer far superior benefits to Illinois. Each state entry in figure 1 is larger than the sum of the international entries. Up to now, however, little has been known about interstate trade flows. While detailed monthly and annual data are kept on international trade, the last survey-based interstate trade flow data were collected in 1967. In the last 30 years, significant changes have taken place in the structure of state economies—particularly those in the Midwest—and in the relationship between the U.S. and the rest of the world.



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