The Home Market Effect in Models with Multinational Enterprises
25 Pages Posted: 23 Dec 2003
Date Written: December 15, 2003
Abstract
Trade patterns in New Trade Theory models and agglomeration patterns in New Economic Geography models crucially depend on the effect that a higher local demand for products leads to a larger share of production of these products, namely the home market effect. Multinationals could exploit higher foreign demand without incurring transport costs by setting up a plant abroad, which destroys the driving force of the home market effect. This paper demonstrates that in the presence of multinationals the home market effect reappears via a different channel, relying on the repatriation of profits rather than on interindustry trade.
Keywords: Home market effect, Multinationals, Transport
JEL Classification: F12, F23
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Empirics of Agglomeration and Trade
By Keith Head and Thierry Mayer
-
Market Access, Economic Geography, and Comparative Advantage: an Empirical Assessment
-
Economic Geography and Regional Production Structure: An Empirical Investigation
-
Economic Geography and Reginal Production Structure: An Empirical Investigation
-
The Home Market Effect and Bilateral Trade Patterns
By Gordon H. Hanson and Chong Xiang
-
On the Pervasiveness of Home Market Effects
By Keith Head, Thierry Mayer, ...