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Home market effect, land rent, and welfare

Yiming Zhou ()
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Yiming Zhou: Jiangxi University of Finance and Economics

Asia-Pacific Journal of Regional Science, 2019, vol. 3, issue 2, 561-580

Abstract: Abstract This paper develops a general-equilibrium model which features the Home Market Effect and land use for production in the sector of increasing returns to scale. The land rent in the larger region is higher. Meanwhile, the larger region holds a more-than-proportionate share of firms, the so called HME in terms of firm share. These two aspects of spatial inequalities are shown to be equivalent. Moreover, the industrial distribution in the larger region and the land rent differential form bell-shaped patterns in economic integration. We demonstrate that the welfare in the larger region is higher and both regions may benefit from trade liberalization.

Keywords: Home market effect; Land rent; Welfare (search for similar items in EconPapers)
JEL-codes: F12 R12 R13 (search for similar items in EconPapers)
Date: 2019
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