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Home market effect, land rent, and welfare

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  • Yiming Zhou

    (Jiangxi University of Finance and Economics
    Harbin Institute of Technology)

Abstract

This paper develops a general-equilibrium model which features the Home Market Effect and land use for production in the sector of increasing returns to scale. The land rent in the larger region is higher. Meanwhile, the larger region holds a more-than-proportionate share of firms, the so called HME in terms of firm share. These two aspects of spatial inequalities are shown to be equivalent. Moreover, the industrial distribution in the larger region and the land rent differential form bell-shaped patterns in economic integration. We demonstrate that the welfare in the larger region is higher and both regions may benefit from trade liberalization.

Suggested Citation

  • Yiming Zhou, 2019. "Home market effect, land rent, and welfare," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 561-580, June.
    • Handle: RePEc:spr:apjors:v:3:y:2019:i:2:d:10.1007_s41685-018-00103-6
    DOI: 10.1007/s41685-018-00103-6
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    Cited by:

    1. Yasushi Asami & Jean-Claude Thill, 2019. "Special feature section on spatial analysis and modeling," Asia-Pacific Journal of Regional Science, Springer, vol. 3(2), pages 517-519, June.

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    More about this item

    Keywords

    Home market effect; Land rent; Welfare;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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