A Decomposition of the Home-Market Effect
AbstractAlthough the home-market effect has become one of the most important concepts in both trade theory and the new economic geography, it lacks a compelling graphical representation. The purpose of this note is to offer such a representation. We will decompose the homemarket effect into two steps: a short-run response to population shift, creating entry-stimulating excess profits (in the short run) for firms of the country that experiences a population gain, and a further round of entries into the monopolistic sector of the expanding country induced by exits in the foreign industry.
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Bibliographic InfoPaper provided by Graduate School of Economics, Kobe University in its series Discussion Papers with number 1002.
Date of creation: May 2010
Date of revision:
Monopolistic Competition; Home-Market Effect; Entry-Exit Process;
Other versions of this item:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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