Publication

This paper presents a new trade theory model which is based on a cross-sectional dataset analysis of firm level exports for 116 countries. The findings of the analysis indicate that a home market effect in domestic sales of manufactured goods is found to co-exist with a reversed home market effect in exports of manufactured goods. It also finds that market conditions, rather than firm-level differences in marginal costs, are the main determinants of the number of exporting manufacturing firms. As a consequence of these results, the author argues that the extensive margin of exports decreases with relative size of the home market.