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Mobile capital and the home market effect

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  • Hajime Takatsuka
  • Dao-Zhi Zeng

Abstract

Most existing studies examine the home market effect (HME) in a framework with immobile labour as the only production factor and the assumption of a freely traded homogeneous good is known to be crucial for the HME to emerge. This study explores the HME in the presence of mobile capital by use of a footloose capital model allowing for positive transport costs of the homogeneous good. The mobile capital generates a channel to offset the trade imbalance of a country. As a result, the HME always appears for arbitrary transport costs in both sectors of differentiated and homogeneous goods.

Suggested Citation

  • Hajime Takatsuka & Dao-Zhi Zeng, 2012. "Mobile capital and the home market effect," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1062-1082, August.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:3:p:1062-1082
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    Citations

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    Cited by:

    1. Kichko, Sergey & Kokovin, Sergey & Zhelobodko, Evgeny, 2014. "Trade patterns and export pricing under non-CES preferences," Journal of International Economics, Elsevier, vol. 94(1), pages 129-142.
    2. Zeng, Dao-Zhi & Uchikawa, Tomohiro, 2014. "Ubiquitous inequality: The home market effect in a multicountry space," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 225-233.
    3. Tadashi Morita & Hajime Takatsuka & Kazuhiro Yamamoto, 2015. "Does Globalization Foster Economic Growth?," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 492-519, December.
    4. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    5. TAKATSUKA Hajime & NAKAMURA Ryohei, 2010. "Emission Credit Trading and Regional Inequalities," Discussion papers 10062, Research Institute of Economy, Trade and Industry (RIETI).
    6. Hayato Kato & Toshihiro Okubo, 2017. "Market Size in Globalization," Keio-IES Discussion Paper Series 2017-001, Institute for Economics Studies, Keio University.
    7. repec:bla:ijethy:v:13:y:2017:i:1:p:47-71 is not listed on IDEAS

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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