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Gravity, market potential and development

Author

Listed:
  • Keith Head

    (Sauder School of Business [British Columbia])

  • Thierry Mayer

    (Département d'économie)

Abstract

This article 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 proximity to large markets, referred to as ‘market potential’. The empirical part evaluates this market potential for all countries in the world with available trade data over the 1965–2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.

Suggested Citation

  • Keith Head & Thierry Mayer, 2011. "Gravity, market potential and development," Sciences Po publications info:hdl:2441/c8dmi8nm4pd, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8mb6c01j
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    References listed on IDEAS

    as
    1. Laura Hering & Sandra Poncet, 2006. "Market Access Impact on Individual Wage: Evidence from China," Working Papers 2006-23, CEPII research center.
    2. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Sciences Po publications info:hdl:2441/10192, Sciences Po.
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    Cited by:

    1. Fabien CANDAU & Elisa DIENESCH, 2013. "Does Globalization explain Urbanization in the World and in Asia?," Working Papers 2013-2014_7, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Dec 2013.
    2. Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A "Market Access" Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 131(2), pages 799-858.
    3. Candau, Fabien & Rey, Serge, 2014. "The effect of the euro on aeronautic trade: A French regional analysis," Economic Modelling, Elsevier, vol. 41(C), pages 345-355.
    4. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Working Papers hal-00630711, HAL.
    5. Thomas Barré, 2011. "Price expectations and price dynamics: the case of the rice sector in developing Asia," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00630711, HAL.
    6. repec:bla:worlde:v:40:y:2017:i:1:p:88-115 is not listed on IDEAS
    7. repec:eee:jeeman:v:85:y:2017:i:c:p:171-192 is not listed on IDEAS
    8. Xiaohuan Lan & Ben G. Li, 2015. "The Economics of Nationalism," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 294-325, May.
    9. Candau, Fabien & Dienesch, Elisa, 2017. "Pollution Haven and Corruption Paradise," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 171-192.
    10. repec:hal:journl:dumas-00802143 is not listed on IDEAS
    11. Candau, Fabien & Dienesch, Elisa, 2017. "Pollution Haven and Corruption Paradise," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 171-192.
    12. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2014. "Panel Data Gravity Models of International Trade," CESifo Working Paper Series 4616, CESifo Group Munich.

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