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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
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  2. Eric Strobl, & Salvador Barrios, 2006. "The dynamics of regional inequalities," Working Papers 2006-01, FEDEA.
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  12. Toshiaki Takahashi & Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Spatial inequality, globalization, and footloose capital," Economic Theory, Springer, vol. 53(1), pages 213-238, May.
  13. Krugman, Paul, 1995. "Increasing returns, imperfect competition and the positive theory of international trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 24, pages 1243-1277 Elsevier.
  14. Sudhir Anand & Paul Segal, 2008. "What Do We Know about Global Income Inequality?," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 57-94, March.
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  18. 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.
  19. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  20. Dao-Zhi Zeng & Toru Kikuchi, 2009. "Home Market Effect And Trade Costs," The Japanese Economic Review, Japanese Economic Association, vol. 60(2), pages 253-270.
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