research seminar in international economics school of public policy the university michigan ann arbor 48109 1220 discussion paper no 481 home market effect and bilateral trade patterns gordon h hanson california san diego chong xiang purdue june 2002 recent rsie papers are available on world wide web at http www spp umich edu workingpapers wp html 1 graduate relations pacific studies national bureau economic department abstract we test for effects using a difference gravity specification is tendency large countries to be net exporters goods with high transport costs strong scale economies it predicted by models based increasing returns but not comparative advantage our estimation approach select pairs exporting that belong common preferential area examine their exports relative
