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Ubiquitous inequality: The home market effect in a multicountry space

  • Zeng, Dao-Zhi
  • Uchikawa, Tomohiro

We show that spatial inequalities in an economic space of multiple countries in terms of both nominal income and real income are ubiquitous in the sense that they appear when countries are differentiated by population only. A new trade theory model is constructed without any freely traded homogeneous good, so that we can examine the home market effect (HME) and the non-monotonic relation between income inequalities and globalization. Meanwhile, there are three HME definitions for a two-country space in terms of firm share, labor wage, and trade pattern. The first two remain applicable in a multicountry space, and they are shown to be equivalent. However, a natural extension of the third is not equivalent.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 50 (2014)
Issue (Month): C ()
Pages: 225-233

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Handle: RePEc:eee:mateco:v:50:y:2014:i:c:p:225-233
DOI: 10.1016/j.jmateco.2013.11.007
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