On the Pervasiveness of Home Market Effects

28 Pages Posted: 30 Aug 2002

See all articles by Keith Head

Keith Head

University of British Columbia (UBC) - Sauder School of Business

Thierry Mayer

Université Paris I Panthéon-Sorbonne - TEAM; Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; Centre for Economic Policy Research (CEPR)

John C. Ries

University of British Columbia (UBC) - SFU-UBC Centre for the Study of Government and Business; University of British Columbia (UBC) - Sauder School of Business

Date Written: July 2002

Abstract

Krugman's (1980) model of trade predicts that the country with the relatively large number of consumers is the net exporter and hosts a disproportionate share of firms in the increasing returns sector. He terms these results 'home market effects'. This Paper analyzes three additional models featuring increasing returns, firm mobility, and trade costs to assess the robustness of home market effects to alternative modeling assumptions. We find strikingly similar results for two of the models that relax assumptions about the nature of demand, competition, and trade costs. A model that links varieties to nations rather than firms can, however, generate opposite results.

Keywords: Spatial competition, home market effect, increasing returns

JEL Classification: F12, R3

Suggested Citation

Head, Keith Charles and Mayer, Thierry and Ries, John C. and Ries, John C., On the Pervasiveness of Home Market Effects (July 2002). Available at SSRN: https://ssrn.com/abstract=325706

Keith Charles Head (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8492 (Phone)
604-822-8477 (Fax)

Thierry Mayer

Université Paris I Panthéon-Sorbonne - TEAM ( email )

106-112 boulevard de l'hôpital
Cedex 13 Paris, P75647
France

HOME PAGE: http://team.univ-paris1.fr/teamperso/mayer/thierry.htm

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

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75007 Paris
France
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CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris ( email )

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France

HOME PAGE: http://www.cepii.fr/anglaisgraph/pagepers/mayer.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

John C. Ries

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

University of British Columbia (UBC) - SFU-UBC Centre for the Study of Government and Business ( email )

2053 Main Mall
Vancouver, British Columbia V6T 1Z2
Canada
604-822-8493 (Phone)
604-822-8477 (Fax)

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