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Mobile capital and the home market effect

Author

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  • Hajime Takatsuka
  • Dao‐Zhi Zeng

Abstract

Most existing studies examine the home market effect (HME) in a framework with immobile labour as the only production factor and the assumption of a freely traded homogeneous good is known to be crucial for the HME to emerge. This study explores the HME in the presence of mobile capital by use of a footloose capital model allowing for positive transport costs of the homogeneous good. The mobile capital generates a channel to offset the trade imbalance of a country. As a result, the HME always appears for arbitrary transport costs in both sectors of differentiated and homogeneous goods. La plup art des travaux existants étudient l’effet du marché domestique dans un cadre d’analyse où le travail immobile est le seul facteur de production et où le postulat d’un bien homogène librement échangé est considéré comme un élément crucial pour que l’effet du marché domestique émerge. Ce texte explore le phénomène dans le cas où le capital est mobile et où on utilise un modèle de capital libre comme l’air avec coûts de transport positifs pour le bien homogène. Le capital mobile engendre un canal pour compenser le déséquilibre commercial d’un pays. En conséquence, l’effet du pays domestique apparaît toujours pour des coûts de transport arbitraires dans les secteurs des biens différenciés ou homogènes.

Suggested Citation

  • Hajime Takatsuka & Dao‐Zhi Zeng, 2012. "Mobile capital and the home market effect," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 1062-1082, August.
  • Handle: RePEc:wly:canjec:v:45:y:2012:i:3:p:1062-1082
    DOI: 10.1111/j.1540-5982.2012.01727.x
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    Cited by:

    1. Kato, Hayato & Okubo, Toshihiro, 2018. "Market size in globalization," Journal of International Economics, Elsevier, vol. 111(C), pages 34-60.
    2. Zeng, Dao-Zhi & Uchikawa, Tomohiro, 2014. "Ubiquitous inequality: The home market effect in a multicountry space," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 225-233.
    3. Tadashi Morita & Hajime Takatsuka & Kazuhiro Yamamoto, 2015. "Does Globalization Foster Economic Growth?," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 492-519, December.
    4. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    5. Hajime Takatsuka, 2020. "Uniform emission taxes, abatement, and spatial disparities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1133-1166, October.
    6. TAKATSUKA Hajime & NAKAMURA Ryohei, 2010. "Emission Credit Trading and Regional Inequalities," Discussion papers 10062, Research Institute of Economy, Trade and Industry (RIETI).
    7. Barbero, Javier & Behrens, Kristian & Zofío, José L., 2018. "Industry location and wages: The role of market size and accessibility in trading networks," Regional Science and Urban Economics, Elsevier, vol. 71(C), pages 1-24.
    8. Juin-Jen Chang & Yi-Ling Cheng & Shin-Kun Peng, 2017. "Social comparisons in consumption, international capital flows and tax competition," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(1), pages 47-71, March.
    9. repec:wsr:wpaper:y:2013:i:124 is not listed on IDEAS

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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