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The home market and the pattern of trade: round three

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Author Info
Thomas J. Holmes
John J. Stevens

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Abstract

Does national market size matter for industrial structure? Round One (Krugman) answered in the affirmative: Home market effects matter. Round Two (Davis) refuted this, arguing that an assumption of convenience--transport costs only for the differentiated goods--conveniently obtained the result. In Round Three we relax another persistent assumption of convenience--industry types differentiated only by the degree of scale economies--and find that market size reemerges as a relevant force in determining industrial structure.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2002-23.

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Date of creation: 2002
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Handle: RePEc:fip:fedgfe:2002-23

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Keywords: Industrial organization (Economic theory) ; Markets;

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This paper has been announced in the following NEP Reports: 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.:
  1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  2. Thomas J. Holmes & John J. Stevens, 2002. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Finance and Economics Discussion Series 2002-17, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  3. Davis, Donald R, 1998. "The Home Market, Trade, and Industrial Structure," American Economic Review, American Economic Association, vol. 88(5), pages 1264-76, December. [Downloadable!] (restricted)
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  4. Thomas J. Holmes, 1999. "Scale of Local Production and City Size," American Economic Review, American Economic Association, vol. 89(2), pages 317-320, May. [Downloadable!] (restricted)
  5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  6. Amiti, Mary, 1998. "Inter-industry trade in manufactures: Does country size matter?," Journal of International Economics, Elsevier, vol. 44(2), pages 231-255, April. [Downloadable!] (restricted)
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(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. Thomas J. Holmes & John J. Stevens, 2002. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Finance and Economics Discussion Series 2002-17, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  2. Gordon H. Hanson & Chong Xiang, 2002. "The Home Market Effect and Bilateral Trade Patterns," Working Papers 481, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
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