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Testing the Ôhome market effectÕ in a multi-country world

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Author Info
BEHRENS, Kristian
LAMORGESE, Andrea R.
OTTAVIANO, Gianmarco I.P.
TABUCHI, Takatoshi

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Abstract

We extend Krugman's (1980) two-country two-sector model to a setup with arbitrary numbers of countries and sectors. The extended model predicts an adequately defined "home market effect" only after controlling for cross-country differential accessibility through a theory-based linear filter. We bring that prediction to data by running a battery of non-parametric sign- and rank-tests that are closely related to those used in factor proportions theory. When applied to production and trade data on a cross-section of OECD and non-OECD countries, we find support for the presence of "home market effects" in a broad number of industries.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005055.

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Date of creation: 01 Sep 2005
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Handle: RePEc:cor:louvco:2005055

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Related research
Keywords: home market effect; new trade theory; multi-country models; market potential; economic geography;

Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
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  21. Behrens, Kristian & Lamorgese, Andrea & Ottaviano, Gianmarco Ireo Paolo & Tabuchi, Takatoshi, 2004. "Testing the Home Market Effect in a Multi-Country World: The Theory," CEPR Discussion Papers 4468, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Behrens, Kristian & Mion, Giordano & Ottaviano, Gianmarco Ireo Paolo, 2007. "Industry Reallocations in a Globalizing Economy," CEPR Discussion Papers 6049, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Balogun, Emmanuel Dele, 2007. "Exchange rate policy and export performance of WAMZ countries," MPRA Paper 6233, University Library of Munich, Germany. [Downloadable!]
  3. Kristian Behrens & Cem Ertur & Wilfried Koch, 2007. "Dual' gravity: Using spatial econometrics to control for multilateral resistance," CIRJE F-Series CIRJE-F-501, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
    Other versions:
  4. Balogun, Emmanuel Dele, 2009. "Determinants of West African Monetary Zone (WAMZ)countries global export trade: do foreign reserves and independent exchange rates matter?," MPRA Paper 12929, University Library of Munich, Germany. [Downloadable!]
  5. J. Suedekum, 2007. "Identifying the dynamic home market effect in a three-country model," Journal of Economics, Springer, vol. 92(3), pages 209-228, December. [Downloadable!] (restricted)
  6. Gianfranco De Simone, 2008. "Trade in Parts and Components and the Industrial Geography of Central and Eastern European Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(3), pages 428-457, October. [Downloadable!] (restricted)
  7. Balogun, Emmanuel Dele, 2007. "Effects of exchange rate policy on bilateral export trade of WAMZ countries," MPRA Paper 6234, University Library of Munich, Germany. [Downloadable!]
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