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Testing for the Home Market Effect in Inter-Regional Trade in Korea

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  • Jea-Kyung Kim

Abstract

This study attempts to test the HME hypothesis in inter-regional Korean trade. For this purpose, we draw on the multi-regional model recently developed by Behrens et al. (2009). In particular, we utilize Behrens et al.’s (2009) simple linear filter, which allows us to separate the “pure HME†from “the third-country effect†. Our contribution includes converting the theoretical simple linear filter into an empirical framework for testing HME. We apply the empirical linear filter to inter-regional trade data of 100 manufacturing industries for 16 Korean regions. Our tests identify the presence of HME in inter-regional trade and its strength appears to be greater than that observed in the international context of earlier studies. Furthermore, important third-country effects are observed across Korean regions.

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  • Jea-Kyung Kim, 2015. "Testing for the Home Market Effect in Inter-Regional Trade in Korea," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 5(1), pages 1-5.
    • Handle: RePEc:spt:admaec:v:5:y:2015:i:1:f:5_1_5
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