A report published by a school or other institution, usually numbered within a series.
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Home-Biased Demand and International Specialisation: A Test of Trade Theories
Université de Lausanne - HEC - DEEP
Cahiers de recherches économiques
Number of pages
We develop and apply a discriminating criterion to distinguish the two principal paradigms of international trade theory: constant-returns perfectly competitive models on the one hand, and increasing-returns monopolistically competitive models on the other. Our criterion rests on the existence of home-biased demand. It predicts a positive relationship between countries' relative output and their relative home bias in increasing-returns sectors, and no relationship in constant-returns sectors. In implementing the test on data for OECD countries we find that industries accounting for up to two thirds of manufacturing output conform to the increasing-returns monopolistically competitive model.
International specialisation, home-market effect, increasing returns
Last modification date