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Market Potential and Development

  • Mayer, Thierry

This paper provides evidence on the long-term impact of market potential on economic development. It derives from the New Economic Geography literature a structural estimation where the level of factors' income of a country is related to its export capacity, labelled Market Access (MA) by Redding and Venables (2004), or Real Market Potential (RMP) by Head and Mayer (2004). The empirical part evaluates this market potential for all countries in the world with available trade data over the 1960-2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6798.

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Date of creation: Apr 2008
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Handle: RePEc:cpr:ceprdp:6798
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  1. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  2. Thibault Fally & Rodrigo Paillacar & Cristina Terra, 2008. "Economic Geography and Wages in Brazil: Evidence from Micro-Data," THEMA Working Papers 2008-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
  4. Head, Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
  5. Redding, Stephen & Schott, Peter K., 2003. "Distance, skill deepening and development: will peripheral countries ever get rich?," Journal of Development Economics, Elsevier, vol. 72(2), pages 515-541, December.
  6. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  7. Redding, Stephen J. & Venables, Anthony J, 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
  8. repec:inr:wpaper:21709 is not listed on IDEAS
  9. Laura Hering & Sandra Poncet, 2006. "Market Access Impact on Individual Wage: Evidence from China," Working Papers 2006-23, CEPII research center.
  10. Mion, Giordano & Naticchioni, Paolo, 2005. "Urbanization Externalities, Market Potential and Spatial Sorting of Skills and Firms," CEPR Discussion Papers 5172, C.E.P.R. Discussion Papers.
  11. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  12. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
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