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Trade costs and the Home Market Effect

Matthieu Crozet () and Federico Trionfetti

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: Most of the theoretical and empirical studies on the Home Market Effect (HME) assume the existence of an \outside good" that absorbs all trade imbalances and equalizes wages. We study the consequences on the HME of removing this assumption. The HME is attenuated and, more interestingly, it becomes non-linear. The non-linearity implies that the HME is more important for very large and very small countries than for medium size countries. The empirical investigation conducted on a database comprising 25 indus- tries, 25 countries, and 7 years con¯rms the presence of the HME and of its non-linear shape.

Keywords: International trade; Test of trade theories; Economic geography; Home Market Effect (search for similar items in EconPapers)
Date: 2008-12
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00497693
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Published in Journal of International Economics, Elsevier, 2008, 76 (2), pp.309-321. ⟨10.1016/j.jinteco.2008.07.006⟩

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Working Paper: Trade costs and the Home Market Effect (2008) Downloads
Working Paper: Trade Costs and the Home Market Effect (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-00497693

DOI: 10.1016/j.jinteco.2008.07.006

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