Trade costs and the Home Market Effect

Most of the theoretical and empirical studies on the Home Market Effect (HME) assume the existence of an “outside good” that absorbs all trade imbalances and equalizes wages. We study the consequences on the HME of removing this assumption. The HME is attenuated and, more interestingly, it becomes n...

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Veröffentlicht in:	Journal of international economics 2008-12, Vol.76 (2), p.309-321
Hauptverfasser:	Crozet, Matthieu, Trionfetti, Federico
Format:	Artikel
Sprache:	eng
Schlagworte:	Balance of trade Cost analysis Domestic market Economic geography Economic theory Economics and Finance Home Market Effect Humanities and Social Sciences International trade International trade Test of trade theories Economic geography Home Market Effect F1 R12 R12 Studies Test of trade theories Trade theory Wage differentials Wages & salaries
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container_end_page	321
container_issue	2
container_start_page	309
container_title	Journal of international economics
container_volume	76
creator	Crozet, Matthieu Trionfetti, Federico
description	Most of the theoretical and empirical studies on the Home Market Effect (HME) assume the existence of an “outside good” that absorbs all trade imbalances and equalizes wages. We study the consequences on the HME of removing this assumption. The HME is attenuated and, more interestingly, it becomes non-linear. The non-linearity implies that the HME is more important for very large and very small countries than for medium size countries. The empirical investigation conducted on a database comprising 25 industries, 25 countries, and 7 years confirms the presence of the HME and of its non-linear shape.
doi_str_mv	10.1016/j.jinteco.2008.07.006
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source	RePEc; ScienceDirect Journals (5 years ago - present)
subjects	Balance of trade Cost analysis Domestic market Economic geography Economic theory Economics and Finance Home Market Effect Humanities and Social Sciences International trade International trade Test of trade theories Economic geography Home Market Effect F1 R12 R12 Studies Test of trade theories Trade theory Wage differentials Wages & salaries
title	Trade costs and the Home Market Effect
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