The Home Market, Trade, and Industrial Structure

29 Pages Posted: 20 Jun 2000 Last revised: 10 Aug 2022

See all articles by Donald R. Davis

Donald R. Davis

National Bureau of Economic Research (NBER); Columbia University

Multiple version iconThere are 2 versions of this paper

Date Written: June 1997


Does national market size matter for industrial structure? This has been suggested by theoretical work on home market' effects, as in Krugman (1980, 1995). In this paper, I show that what previously was regarded as an assumption of convenience - transport costs only for the differentiated goods - matters a great deal. In a focal case in which differentiated and homogeneous goods have identical transport costs, the home market effect disappears. The paper discusses available evidence on the relative trade costs for differentiated and homogenous goods. No compelling argument is found that market size will matter for industrial structure.

Suggested Citation

Davis, Donald R., The Home Market, Trade, and Industrial Structure (June 1997). NBER Working Paper No. w6076, Available at SSRN:

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Columbia University ( email )

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