IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v38y2005i1p255-272.html
   My bibliography  Save this article

Trade, market size, and industrial structure: revisiting the home-market effect

Author

Listed:
  • Zhihao Yu

Abstract

This paper shows that the issues in the recent discussion over the `home-market effects' are more complicated than previously thought. It is shown that, in general, market size matters for industrial structure even when both the homogeneous and the differentiated goods face transport costs. The home-market effect for production structure can arise, disappear, or even reverse in sign. The analysis shall change a common perception about de-industrialization of (small) economies and may also have important implications for the empirical research strategies in this area.

Suggested Citation

  • Zhihao Yu, 2005. "Trade, market size, and industrial structure: revisiting the home-market effect," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 255-272, February.
    • Handle: RePEc:cje:issued:v:38:y:2005:i:1:p:255-272
    DOI: 10.1111/j.0008-4085.2005.00279.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0008-4085.2005.00279.x
    Download Restriction: access restricted to subscribers
    File URL: https://libkey.io/10.1111/j.0008-4085.2005.00279.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Davis, Donald R, 1998. "The Home Market, Trade, and Industrial Structure," American Economic Review, American Economic Association, vol. 88(5), pages 1264-1276, December.
    2. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
    3. Keith Head & Thierry Mayer & John Ries, 2000. "On the Pervasiveness of Home Market Effects," Econometric Society World Congress 2000 Contributed Papers 0862, Econometric Society.
    4. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    5. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    6. repec:hal:wpspec:info:hdl:2441/c8dmi8nm4pdjkuc9g8o4o0m0g is not listed on IDEAS
    7. Davis, Donald R. & Weinstein, David E., 1999. "Economic geography and regional production structure: An empirical investigation," European Economic Review, Elsevier, vol. 43(2), pages 379-407, February.
    8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    10. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    11. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(2), pages 430-447, May.
    12. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8o4o0m0g is not listed on IDEAS
    13. Weder, Rolf, 1995. "Linking Absolute and Comparative Advantage to Intra-industry Trade Theory," Review of International Economics, Wiley Blackwell, vol. 3(3), pages 342-354, October.
    14. Krugman, Paul, 1995. "Increasing returns, imperfect competition and the positive theory of international trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 24, pages 1243-1277, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fabien Candau, 2008. "Entrepreneurs' Location Choice And Public Policies: A Survey Of The New Economic Geography," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 909-952, December.
    2. Yo-Yi Huang & Cheng-Te Lee & Deng-Shing Huang, 2014. "Home Market Effects In The Chamberlinian–Ricardian World," Bulletin of Economic Research, Wiley Blackwell, vol. 66(S1), pages 36-54, December.
    3. Crozet, Matthieu & Trionfetti, Federico, 2008. "Trade costs and the Home Market Effect," Journal of International Economics, Elsevier, vol. 76(2), pages 309-321, December.
    4. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    5. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
    6. Auer, Raphael A., 2017. "Product heterogeneity, cross-country taste differences, and the growth of world trade," European Economic Review, Elsevier, vol. 100(C), pages 1-27.
    7. Garcia Pires, Armando J., 2013. "Home market effects with endogenous costs of production," Journal of Urban Economics, Elsevier, vol. 74(C), pages 47-58.
    8. BEHRENS, Kristian, 2004. "Market size and urban hierarchy," LIDAM Discussion Papers CORE 2004029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    10. Mario Larch, 2007. "The Home Market Effect in Models with Multinational Enterprises," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 62-74, February.
    11. Brülhart, Marius & Trionfetti, Federico, 2009. "A test of trade theories when expenditure is home biased," European Economic Review, Elsevier, vol. 53(7), pages 830-845, October.
    12. Deng-Shing Huang & Yo-Yi Huang & Cheng-Te Lee, 2006. "Technology Advantage and Trade: Home Market Effects Revisited," IEAS Working Paper : academic research 06-A011, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    13. Hajime Takatsuka & Dao-Zhi Zeng, 2012. "Mobile capital and the home market effect," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1062-1082, August.
    14. Takatoshi Tabuchi & Kristian Behrens & Andrea R. Lamorgese, 2004. "Testing the Home Market Effects in a Multi-country World: The Theory," Econometric Society 2004 Far Eastern Meetings 595, Econometric Society.
    15. 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.
    16. Ai‐Ting Goh & Tomasz K. Michalski, 2012. "Quality Assurance and the Home Market Effect," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 237-255, May.
    17. Yo-Yi Huang & Deng-Shing Huang & Ching-lung Tsay, 2016. "Trade Creation, Home-Market Effects under Regional Economic Integration," IEAS Working Paper : academic research 16-A015, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    18. Stephen J. Redding, 2013. "Economic Geography: A Review of the Theoretical and Empirical Literature," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 16, pages 497-531, Palgrave Macmillan.
    19. Huang, Yo-Yi & Huang, Deng-Shing, 2014. "Big vs. small under free trade: Market size and size distribution of firms," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 175-189.
    20. Behrens, Kristian & Lamorgese, Andrea R. & Ottaviano, Gianmarco I.P. & Tabuchi, Takatoshi, 2009. "Beyond the home market effect: Market size and specialization in a multi-country world," Journal of International Economics, Elsevier, vol. 79(2), pages 259-265, November.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:38:y:2005:i:1:p:255-272. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prof. Werner Antweiler (email available below). General contact details of provider: https://edirc.repec.org/data/ceaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.