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| Toru Kikuchi and Ngo van Long |
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| ''A decomposition of the home-market effect'' |
| ( 2010, Vol. 30 No.4 ) |
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| 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. |
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| Keywords: Monopolistic Competition, Home-Market Effect, Entry-Exit Process |
JEL: F1 - Trade: General
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| Manuscript Received : May 06 2010 | | Manuscript Accepted : Oct 26 2010 |
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