Does the Home Market Effect Arise in a Three-Country Model?

Jens Südekum
Authors registered in the RePEc Author Service: Jens Suedekum

No 42, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: It is uncertain whether the fundamental 'home market effect' (HME) generalizes from a two-country model to a more realistic setting with multiple countries. We present a three-country version of the seminal model by Krugman (1980) and analyse under which circumstances the HME is present once third country effects are taken into account. We show that both expenditure shifts and exogenous enlargements among foreign countries can rule out the HME.

Keywords: New trade theory; home market effect; hub effect (search for similar items in EconPapers)
JEL-codes: F12 F14 R12 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cegedp:42

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