Home market effect and trade costs

Dao Zhi Zeng, Toru Kikuchi

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


Concerning industrial location, the home market effect (HME) predicts that a large country is a net exporter of industrial goods. Recent literature shows that high transport costs in the traditional sector may obscure the HME in an early model of two sectors à la Helpman and Krugman. This paper presents an alternative model that displays the relationship between the HME and arbitrary transport costs while allowing for the derivation of analytical results by simple algebra. Our results show that the transport costs in the traditional sector do not obscure the HME but constitute a dispersion force that decreases the impact of the HME.

Original languageEnglish
Pages (from-to)253-270
Number of pages18
JournalJapanese Economic Review
Issue number2
Publication statusPublished - 2009

ASJC Scopus subject areas

  • Economics and Econometrics


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