| Keith Head, University of British Columbia Thierry Mayer, University of Paris I John Ries, University of British Columbia |
| On the Pervasiveness of Home Market Effects |
| Session: C-12-9 Wednesday 16 August 2000 by Head, Keith |
| Krugman's model of trade between two countries of unequal size predicts that the country with the relatively large number of consumers is the net exporter and host of a disproportionate share of firms in the differentiated good sector. He terms these results home market effects. This paper analyzes two models that offer alternatives to Krugman's assumptions of Dixit-Stiglitz monopolistic competition with iceberg transport costs. Using a framework of location choice, we generate strikingly similar results for the three models. The common ingredients of these imperfect competition models are trade costs and increasing returns to scale. |
| Submitted paper full-text in .pdf |