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Trade costs and the Home Market Effect

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Author Info

  • Matthieu Crozet

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - CEPII, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Federico Trionfetti

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR6579)

Abstract

Most of the theoretical and empirical studies on the Home Market Effect (HME) assume the existence of an \outside good" that absorbs all trade imbalances and equalizes wages. We study the consequences on the HME of removing this assumption. The HME is attenuated and, more interestingly, it becomes non-linear. The non-linearity implies that the HME is more important for very large and very small countries than for medium size countries. The empirical investigation conducted on a database comprising 25 indus- tries, 25 countries, and 7 years con¯rms the presence of the HME and of its non-linear shape.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00497693.

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Date of creation: Dec 2008
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Publication status: Published, Journal of International Economics, 2008, 76, 2, 309-321
Handle: RePEc:hal:cesptp:hal-00497693

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Related research

Keywords: International trade; Test of trade theories; Economic geography; Home Market Effect;

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Citations

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Cited by:
  1. Pascal Ghazalian & W. Furtan, 2009. "Home market effect in the presence of multinational activities: location and nationality," International Review of Economics, Springer, vol. 56(4), pages 377-392, December.
  2. Felbermayr, Gabriel & Jung, Benjamin, 2012. "The home market effect, regional inequality, and intra-industry reallocations," University of Tuebingen Working Papers in Economics and Finance 33, University of Tuebingen, Faculty of Economics and Social Sciences.
  3. Raphael Anton Auer, 2010. "Consumer Heterogeneity and the Impact of Trade Liberalization: How Representative is the Representative Agent Framework?," Working Papers 2010-13, Swiss National Bank.
  4. Brülhart, Marius & Trionfetti, Federico, 2005. "A Test of Trade Theories when Expenditure is Home Biased," CEPR Discussion Papers 5097, C.E.P.R. Discussion Papers.
  5. Nuria Domeque Claver & Carmen Fillat Castejón & Fernando Sanz Gracia, 2011. "The home market effect in the Spanish industry, 1965–1995," The Annals of Regional Science, Springer, vol. 46(2), pages 379-396, April.
  6. Nelly Exbrayat & Benny Geys, 2011. "Trade Integration and Business Tax Differentials: Theory and Evidence from OECD Countries," Post-Print halshs-00617043, HAL.
  7. Kristian Behrens & Andrea R. Lamorgese & Gianmarco I.P. Ottaviano & Takatoshi Tabuchi, 2009. "Beyond the Home Market Effect: Market Size and Specialization in a Multi-Country World," KITeS Working Papers 023, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2009.
  8. Toshihiro Okubo & Vincent Rebeyrol, 2006. "Home Market Effect and Regulation Costs - Homogeneous Firm and Heterogeneous Firm Trade Models," IHEID Working Papers 02-2006, Economics Section, The Graduate Institute of International Studies.
  9. Takatsuka, Hajime & Zeng, Dao-Zhi, 2012. "Trade liberalization and welfare: Differentiated-good versus homogeneous-good markets," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 308-325.
  10. Andres, Frédéric, 2006. "Divergence, wage-gap and geography," Economics Papers from University Paris Dauphine 123456789/4070, Paris Dauphine University.
  11. Toshiaki Takahashi & Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Spatial inequality, globalization, and footloose capital," Economic Theory, Springer, vol. 53(1), pages 213-238, May.
  12. Exbrayat, Nelly & Geys, Benny, 2012. "Trade integration and business tax differentials: Evidence from OECD countries," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-110, Social Science Research Center Berlin (WZB).
  13. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications 9328, Inter-American Development Bank.
  14. Candau, Fabien, 2006. "The Spatial and Public Economics of Regions, a Theoretical and Empirical Survey," MPRA Paper 1153, University Library of Munich, Germany.
  15. Hajime Takatsuka & Dao-Zhi Zeng, 2011. "Economic Integration and Welfare: Manufacturing vs. Agricultural Markets," ERSA conference papers ersa11p1720, European Regional Science Association.
  16. Gabriel J. Felbermayr & Benjamin Jung, 2011. "Home Market Effects and the Single-Sector Melitz Model," CESifo Working Paper Series 3695, CESifo Group Munich.

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