{"title":"A many-location home market effect and a home biased geography","authors":"Jordan J. Norris","doi":"10.1016/j.jinteco.2025.104057","DOIUrl":null,"url":null,"abstract":"<div><div>In the presence of scale economies, industries are incentivized to localize production. Geography is key in determining where that localization happens. The Home Market Effect (HME) predicts that locations with the largest demand are the host and become net exporters. Yet, since its origin by <span><span>Krugman (1980)</span></span>, the prediction has only been shown to hold in two-location models, therefore questioning its generality and empirical relevance. I offer a new formalization of the HME, provide succinct, sufficient conditions for its presence in an arbitrary, many-location geography, and reveal an intimate connection of the HME with a home biased geography. Intuitively, without home bias, consumers don’t buy locally; production is therefore not incentivized to localize near them.</div></div>","PeriodicalId":16276,"journal":{"name":"Journal of International Economics","volume":"154 ","pages":"Article 104057"},"PeriodicalIF":3.8000,"publicationDate":"2025-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0022199625000133","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
In the presence of scale economies, industries are incentivized to localize production. Geography is key in determining where that localization happens. The Home Market Effect (HME) predicts that locations with the largest demand are the host and become net exporters. Yet, since its origin by Krugman (1980), the prediction has only been shown to hold in two-location models, therefore questioning its generality and empirical relevance. I offer a new formalization of the HME, provide succinct, sufficient conditions for its presence in an arbitrary, many-location geography, and reveal an intimate connection of the HME with a home biased geography. Intuitively, without home bias, consumers don’t buy locally; production is therefore not incentivized to localize near them.
期刊介绍：
The Journal of International Economics is intended to serve as the primary outlet for theoretical and empirical research in all areas of international economics. These include, but are not limited to the following: trade patterns, commercial policy; international institutions; exchange rates; open economy macroeconomics; international finance; international factor mobility. The Journal especially encourages the submission of articles which are empirical in nature, or deal with issues of open economy macroeconomics and international finance. Theoretical work submitted to the Journal should be original in its motivation or modelling structure. Empirical analysis should be based on a theoretical framework, and should be capable of replication.
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