The home market and the pattern of trade: round three

Thomas Holmes (holmes@umn.edu) and John Stevens (john.j.stevens@frb.gov)

No 304, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Does national market size matter for industrial structure? Round One (Krugman) answered in the affirmative: Home market effects matter. Round Two (Davis) refuted this, arguing that an assumption of convenience-transport costs only for the differentiated goods-conveniently obtained the result. In Round Three we relax another persistent assumption of convenience- two industry types differentiated only by the degree of scale economies-and find that market size reemerges as a relevant force in determining industrial structure.

Keywords: Econometric models; International trade (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (3)

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