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On the home market effect: theory and empirical evidence

Federico Trionfetti

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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
Date: 1999-08
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Working Paper: On the Home Market Effect: Theory and Empirical Evidence (1999) Downloads
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