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The home-market effect and bilateral trade patterns: a reexamination of the evidence
This paper finds that the evidence for the home market effect (HME) found by Hanson and Xiang (AER, 2004) is sensitive to the way the dependent and the independent variables are constructed. Second, we also find that the HME evidence goes away when we estimate their difference-in-difference gravity model on a truncated sample of positive trade flows. With Eaton-Tamura-Tobit, Heckman, and Helpman-Melitz-Rubinstein estimation of the gravity equation using Hanson and Xiang's data, we are unable to find any evidence for the HME. Finally, the HME evidence is also absent for a sample of Canadian provinces' exports to U.S. states. All of our results, taken together, do not reject the existence of the HME in general but rather suggest that the HME results found by Hanson and Xiang may not be robust.
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Title of book
International economic integration and domestic performanceVolume
58Series
World scientific studies in international economicsChapter number
8Pagination
135 - 152Publisher
World Scientific Publishing CompanyPlace of publication
SingaporePublisher DOI
ISBN-13
9789813141087Language
engPublication classification
B1 Book chapterCopyright notice
2017, World Scientific Publishing Co. Pte. Ltd.Extent
14Editor/Contributor(s)
Mary LovelyUsage metrics
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