Krugman’s (1980) model of trade predicts that the country with the relatively large number of consumers is the net exporter and hosts a disproportionate share of firms in the increasing returns sector. He terms these results 'home market effects'. This Paper analyzes three additional models featuring increasing returns, firm mobility, and trade costs to assess the robustness of home market effects to alternative modeling assumptions. We find strikingly similar results for two of the models that relax assumptions about the nature of demand, competition, and trade costs. A model that links varieties to nations rather than firms can, however, generate opposite results.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
3454.
Head, Keith & Mayer, Thierry & Ries, John, 2002.
"On the Pervasiveness of Home Market Effects,"
Economica,
London School of Economics and Political Science, vol. 69(275), pages 371-90, August.
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Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location
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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.:
Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002.
"Agglomeration and Trade Revisited,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
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Other versions:
OTTAVIANO, Gianmarco & TABUCHI, Takatoshi & THISSE, Jacques-Franois, 1999.
"Agglomeration and trade revisited,"
CORE Discussion Papers
1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999.
"Agglomeration and Trade Revisited,"
CIRJE F-Series
CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
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