1. The reverse home market effect in exports: A cross-country study of the extensive margin of exports
- Author:
- Medin Hege
- Publication Date:
- 01-2014
- Content Type:
- Working Paper
- Institution:
- Norwegian Institute of International Affairs
- Abstract:
- This paper presents a simple new trade theory model with results that contradict those from standard model. A home market effect in domestic sales of manufactured goods is found to co-exist with a reversed home market effect in exports of manufactured goods. In consequence, for a small country the number of manufacturing firms that sell in the domestic market is lower than proportional whereas the number of exporters is higher than proportional to country size. The proportion of firms that export, decreases with relative size of the home market. Empirical support for the latter prediction is found in a cross-sectional dataset on firm level exports for 116 countries.
- Topic:
- International Relations, Economics, International Political Economy, and International Trade and Finance