A test of trade theories when expenditure is home biased

Marius Brülhart and Federico Trionfetti

Working Papers from HAL

Abstract: We develop a criterion to distinguish two dominant paradigms of international trade theory: homogeneous-goods perfectly competitive models, and differentiated-goods monopolistically competitive models. Our analysis makes use of the pervasive presence of home-biased expenditure. It predicts that countries' relative output and their relative home biases are positively correlated in differentiated-goods sectors (the "home-bias effect"), while no such relationship exists in homogeneous-goods sectors. This discriminating criterion turns out to be robust to a number of generalisations of the baseline model. Our empirical results, based on a world-wide cross-country data set, suggest that the differentiated-goods model fits particularly well for the machinery, precision engineering and transport equipment industries, which account for some 40 percent of sample manufacturing output.

Keywords: international specialisation; new trade theory; home-market effects; border effects (search for similar items in EconPapers)
Date: 2009-03-08
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00366530
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://shs.hal.science/halshs-00366530/document (application/pdf)

Related works:
Journal Article: A test of trade theories when expenditure is home biased (2009)
Working Paper: A Test of Trade Theories when Expenditure is Home Biased (2005)
Working Paper: A Test of Trade Theories when Expenditure is Home Biased (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00366530

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().