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Trade, Entry Barriers, and Home Market Effects

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  • Paul E. Jensen

Abstract

This paper re‐examines the relationship between entry barriers and home market effects and departs from recent work by using returns to scale as a direct measure of entry barriers as opposed to relying on the level of product differentiation as an indirect proxy for barriers to entry. In contrast to earlier work, results of this study do not indicate a significant relationship between home market effects and entry barriers. In addition, examination of trade costs reveals the importance of these costs in the numéraire sector. These two observations are consistent with the theoretical prediction that home market effects are insignificant in the presence of symmetric trade costs across sectors. Consequently, a more direct measure of barriers to entry and an explicit consideration of trade costs indicate that the link between home market effects and barriers to entry is not as strong as predicted by previous work.

Suggested Citation

  • Paul E. Jensen, 2006. "Trade, Entry Barriers, and Home Market Effects," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 104-118, February.
    • Handle: RePEc:bla:reviec:v:14:y:2006:i:1:p:104-118
    DOI: 10.1111/j.1467-9396.2006.00564.x
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    References listed on IDEAS

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    1. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March.
    2. Donald R. Davis & David E. Weinstein, 1998. "Market Access, Economic Geography, and Comparative Advantage: An Empirical Assessment," NBER Working Papers 6787, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Raú l Serrano & Vicente Pinilla, 2012. "The long-run decline in the share of agricultural and food products in international trade: a gravity equation approach to its causes," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4199-4210, November.
    2. Kyoko Hirose & Yushi Yoshida, 2010. "Intra-National Regional Heterogeneity in International Trade," Discussion Papers 42, Kyushu Sangyo University, Faculty of Economics.
    3. Yushi Yoshida, 2007. "Export-Platform Investment with Proximity and Product Differentiation: Empirical Evidence from Port-Level International Trade," Discussion Papers 28, Kyushu Sangyo University, Faculty of Economics.
    4. Mr. Herman Z Bennett & Ziga Zarnic, 2008. "International Competitiveness of the Mediterranean Quartet: A Heterogeneous-Product Approach," IMF Working Papers 2008/240, International Monetary Fund.
    5. Vicent Pinilla & Raúl Serrano, 2010. "The long-run decline in the share of agricultural and food products in international trade, 1951-2000: a gravity equation approach of its causes," Documentos de Trabajo de la Sociedad de Estudios de Historia Agraria 1002, Sociedad de Estudios de Historia Agraria.

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