Market Potential and Development

24 Pages Posted: 12 Jun 2008

See all articles by Thierry Mayer

Thierry Mayer

Université Paris I Panthéon-Sorbonne - TEAM; Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); CEPII, Centre d'Etudes Prospectives et d'Info. Internationales, Paris; Centre for Economic Policy Research (CEPR)

Date Written: April 2008

Abstract

This paper provides evidence on the long-term impact of market potential on economic development. It derives from the New Economic Geography literature a structural estimation where the level of factors' income of a country is related to its export capacity, labelled Market Access (MA) by Redding and Venables (2004), or Real Market Potential (RMP) by Head and Mayer (2004). The empirical part evaluates this market potential for all countries in the world with available trade data over the 1960-2003 period and relates it to income per capita. Overall results show that market potential is a powerful driver of increases in income per capita.

Keywords: Development, Gravity, International Trade, Market Potential

JEL Classification: F15, O11

Suggested Citation

Mayer, Thierry, Market Potential and Development (April 2008). CEPR Discussion Paper No. DP6798, Available at SSRN: https://ssrn.com/abstract=1142179

Thierry Mayer (Contact Author)

Université Paris I Panthéon-Sorbonne - TEAM ( email )

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Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

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