The home market effect, regional inequality, and intra-industry reallocations

Arbeitspapier

In New Trade Theory models, the larger region hosts an overproportionate share of producers. This Home Market Effect (HME) exacerbates regional income discrepancies caused by trade frictions or technology differences. With homogeneous firms, it requires inter-industry reallocations to emerge. We present a heterogeneous firms single-sector model with fixed market access costs, in which the HME arises exclusively from empirically more relevant intra-industry reallocations. It is magnified by lower trade costs or higher heterogeneity. In contrast to multi-industry models, a more pronounced HME leads to regional income convergence as adjustment of the firm size distribution counteracts the effects of firmentry.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: University of Tübingen Working Papers in Economics and Finance ; No. 33

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Size and Spatial Distributions of Regional Economic Activity
• Subject: Home Market Effect ; Regional Inequality ; Monopolistic Competition ; Heterogeneous Firms ; Economic Geography

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Felbermayr, Gabriel ; Jung, Benjamin
• Event: Veröffentlichung
• (who): University of Tübingen, Faculty of Economics and Social Sciences
• (where): Tübingen
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/57880
• URN: urn:nbn:de:bsz:21-opus-61344
• Last update: 10.03.2025, 11:44 AM CET