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Toru Kikuchi and Ngo van Long
''A decomposition of the home-market effect''
( 2010, Vol. 30 No.4 )
Although the home-market effect has become one of the most important concepts in both trade theory and the new economic geography, it lacks a compelling graphical representation. The purpose of this note is to offer such a representation. We will decompose the home-market effect into two steps: a short-run response to population shift, creating entry-stimulating excess profits (in the short run) for firms of the country that experiences a population gain, and a further round of entries into the monopolistic sector of the expanding country induced by exits in the foreign industry.
Keywords: Monopolistic Competition, Home-Market Effect, Entry-Exit Process
JEL: F1 - Trade: General
Manuscript Received : May 06 2010 Manuscript Accepted : Oct 26 2010

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