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On the home market effect: theory and empirical evidence

  • Federico Trionfetti

This paper addresses the question of how to discriminate between the H-O paradigm and the C-H-O paradigm of international trade. The test is based on the home-biased expenditure. The model predicts a positive relationshipp between a country''s share of world''s output (in any particular sector) and the country''s share of world''s home-biased expenditure if and only if the sector is characterize4d by IRS and monopolistic competition. The Empirical implementation showed an important but not overwhelming presence of the relationship. Specifically, 55% of the industrial activity could be attributed to the H-O paradigm while 45% could be attributed to the C-H-O paradigm.

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File URL: http://eprints.lse.ac.uk/20215/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20215.

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Length: 36 pages
Date of creation: Aug 1999
Date of revision:
Handle: RePEc:ehl:lserod:20215
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Web page: http://www.lse.ac.uk/

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  25. Branco, Fernando, 1994. "Favoring domestic firms in procurement contracts," Journal of International Economics, Elsevier, vol. 37(1-2), pages 65-80, August.
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