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Trade, market size, and industrial structure: revisiting the home‐market effect

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  • Zhihao Yu

Abstract

. This paper shows that the issues in the recent discussion over the ‘home‐market effects’ are more complicated than previously thought. It is shown that, in general, market size matters for industrial structure even when both the homogeneous and the differentiated goods face transport costs. The home‐market effect for production structure can arise, disappear, or even reverse in sign. The analysis shall change a common perception about de‐industrialization of (small) economies and may also have important implications for the empirical research strategies in this area. JEL classification: F12, L1 Commerce international, taille du marché, et structure industrielle : un autre coup d’œil à l’effet du marché intérieur. Ce mémoire montre que les problèmes entourant «l’effet de marché intérieur» sont plus complexes qu’on l’avait cru. On montre que, en général, la taille du marché est un élément important pour la structure industrielle même si les biens homogènes et les biens différenciés font face à des coûts de transport significatifs. L’effet de marché intérieur sur la structure de production peut se matérialiser, disparaître ou même changer de signe. L’analyse va changer les perspectives quant à la «désindustrialisation» des (petites)économies, et cela peut avoir des conséquences importantes pour la recherche de stratégies de recherche empirique dans ce domaine.

Suggested Citation

  • Zhihao Yu, 2005. "Trade, market size, and industrial structure: revisiting the home‐market effect," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(1), pages 255-272, February.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:1:p:255-272
    DOI: 10.1111/j.0008-4085.2005.00279.x
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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