IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The home market effect, regional inequality, and intra-industry reallocations

  • Felbermayr, Gabriel
  • Jung, Benjamin

In New Trade Theory models, the larger region hosts an overproportionate share of producers. This Home Market Effect (HME) exacerbates regional income discrepancies caused by trade frictions or technology differences. With homogeneous firms, it requires inter-industry reallocations to emerge. We present a heterogeneous firms single-sector model with fixed market access costs, in which the HME arises exclusively from empirically more relevant intra-industry reallocations. It is magnified by lower trade costs or higher heterogeneity. In contrast to multi-industry models, a more pronounced HME leads to regional income convergence as adjustment of the firm size distribution counteracts the effects of firmentry.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://econstor.eu/bitstream/10419/57880/1/690093098.pdf
Download Restriction: no

Paper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 33.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:zbw:tuewef:33
Contact details of provider: Postal:
Keplerstr. 17, 72074 Tübingen

Phone: 07071/29-72563
Fax: 07071/29-5179
Web page: http://www.wiwi.uni-tuebingen.de/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Felbermayr, Gabriel & Larch, Mario & Lechthaler, Wolfgang, 2009. "Unemployment in an interdependent world," FZID Discussion Papers 06-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
  2. Brülhart, Marius & Trionfetti, Federico, 2009. "A test of trade theories when expenditure is home biased," European Economic Review, Elsevier, vol. 53(7), pages 830-845, October.
  3. Basu, Susanto & Pascali, Luigi & Schiantarelli, Fabio & Serven, Luis, 2012. "Productivity and the welfare of nations," Policy Research Working Paper Series 6026, The World Bank.
  4. Melitz, Marc J & Redding, Stephen J., 2013. "Heterogeneous Firms and Trade," CEPR Discussion Papers 9317, C.E.P.R. Discussion Papers.
  5. Mario Larch, 2007. "The Home Market Effect in Models with Multinational Enterprises," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 62-74, 02.
  6. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  7. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2009. "Beyond the home market effect: Market size and specialization in a multi-country world," Journal of International Economics, Elsevier, vol. 79(2), pages 259-265, November.
  8. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  9. Baldwin, Richard & Okubo, Toshihiro, 2009. "Tax reform, delocation and heterogeneous firms," CEPR Discussion Papers 7340, C.E.P.R. Discussion Papers.
  10. Markus Poschke, 2010. "Skill-biased change in entrepreneurial technology," 2010 Meeting Papers 520, Society for Economic Dynamics.
  11. Svetlana Demidova & Andrés Rodríguez-Clarez, 2011. "The Simple Analytics of the Melitz Model in a Small Open Economy," NBER Working Papers 17521, National Bureau of Economic Research, Inc.
  12. Russell H. Hillberry & Edward J. Balistreri & Thomas F. Rutherford, 2007. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," DEGIT Conference Papers c012_038, DEGIT, Dynamics, Economic Growth, and International Trade.
  13. Medin, Hege, 2003. "Firms' export decisions--fixed trade costs and the size of the export market," Journal of International Economics, Elsevier, vol. 61(1), pages 225-241, October.
  14. Svetlana Demidova & Andrés Rodríguez-Clare, 2007. "Trade Policy under Firm-Level Heterogeneity in a Small Economy," NBER Working Papers 13688, National Bureau of Economic Research, Inc.
  15. Andrew.B Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in international trade," LSE Research Online Documents on Economics 3682, London School of Economics and Political Science, LSE Library.
  16. Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2008. "The spatial selection of heterogeneous firms," Discussion Paper Series 229, Research Institute for Economics & Business Administration, Kobe University.
  17. Ariel Burstein & Jonathan Vogel, 2011. "Factor Prices and International Trade: A Unifying Perspective," NBER Working Papers 16904, National Bureau of Economic Research, Inc.
  18. Bénassy, Jean-Pascal, 1996. "Is there always too little research in endogenous growth with expanding product variety ?," CEPREMAP Working Papers (Couverture Orange) 9615, CEPREMAP.
  19. Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andres Rodriguez-Clare, 2008. "Endogenous Variety and the Gains from Trade," American Economic Review, American Economic Association, vol. 98(2), pages 444-50, May.
  20. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
  21. Davin Chor, 2006. "Subsidies for FDI: Implications from a Model with Heterogenous Firms," 2006 Meeting Papers 475, Society for Economic Dynamics.
  22. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
  23. Felbermayr, Gabriel & Jung, Benjamin, 2012. "Unilateral trade liberalization in the Melitz model: A note," University of Tuebingen Working Papers in Economics and Finance 30, University of Tuebingen, Faculty of Economics and Social Sciences.
  24. Gordon H. Hanson & Chong Xiang, 2002. "The Home Market Effect and Bilateral Trade Patterns," Working Papers 481, Research Seminar in International Economics, University of Michigan.
  25. Crozet, Matthieu & Trionfetti, Federico, 2008. "Trade costs and the Home Market Effect," Journal of International Economics, Elsevier, vol. 76(2), pages 309-321, December.
  26. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  27. John Haltiwanger & Adriana Kugler & Maurice Kugler & Alejandro Micco & Carmen Pages, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(4), pages 191-208.
  28. Natalia Ramondo & Andrés Rodríguez-Clare & Milagro Saborío-Rodríguez, 2012. "Trade, Domestic Frictions, and Scale Effects," NBER Working Papers 18532, National Bureau of Economic Research, Inc.
  29. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Munich Reprints in Economics 20591, University of Munich, Department of Economics.
  30. Toshihiro Okubo & Vincent Rebeyrol, 2006. "Home Market Effect and Regulation Costs - Homogeneous Firm and Heterogeneous Firm Trade Models," IHEID Working Papers 02-2006, Economics Section, The Graduate Institute of International Studies.
  31. Ottaviano, Gianmarco I.P. & van Ypersele, Tanguy, 2005. "Market size and tax competition," Journal of International Economics, Elsevier, vol. 67(1), pages 25-46, September.
  32. Svetlana Demidova, 2008. "Productivity Improvements And Falling Trade Costs: Boon Or Bane?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(4), pages 1437-1462, November.
  33. Ben S. Bernanke & Kenneth Rogoff, 2001. "Editorial in "NBER Macroeconomics Annual 2000, Volume 15"," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 1-4 National Bureau of Economic Research, Inc.
  34. Ben S. Bernanke & Kenneth Rogoff, 2001. "NBER Macroeconomics Annual 2000, Volume 15," NBER Books, National Bureau of Economic Research, Inc, number bern01-1.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:tuewef:33. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.