On the home market effect: theory and empirical evidence
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
This paper addresses the question of how to discriminate between the H-O paradigm and the C-H-O paradigm of international trade. The test is based on the home-biased expenditure. The model predicts a positive relationshipp between a country''s share of world''s output (in any particular sector) and the country''s share of world''s home-biased expenditure if and only if the sector is characterize4d by IRS and monopolistic competition. The Empirical implementation showed an important but not overwhelming presence of the relationship. Specifically, 55% of the industrial activity could be attributed to the H-O paradigm while 45% could be attributed to the C-H-O paradigm.
JEL-codes: J1 L81 (search for similar items in EconPapers)
Pages: 36 pages
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Working Paper: On the Home Market Effect: Theory and Empirical Evidence (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:20215
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