Energy Transitions

Abstract

Does national market size matter for industrial structure? This has been sug- gested by theoretical work on "home market" effects. In the present 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 afocal case in which differentiated and homogeneous goods have identical transport costs, the home market effect disappears. This paper discusses available evidence on the relative trade costs for differentiated and homogeneous goods. No com- pelling argument is found that market size will matter for industrial structure. (JEL Fl, 01, RI)