Home market effect, land rent, and welfare

  • Yiming ZhouEmail author
Spatial Analysis and Modeling


This paper develops a general-equilibrium model which features the Home Market Effect and land use for production in the sector of increasing returns to scale. The land rent in the larger region is higher. Meanwhile, the larger region holds a more-than-proportionate share of firms, the so called HME in terms of firm share. These two aspects of spatial inequalities are shown to be equivalent. Moreover, the industrial distribution in the larger region and the land rent differential form bell-shaped patterns in economic integration. We demonstrate that the welfare in the larger region is higher and both regions may benefit from trade liberalization.


Home market effect Land rent Welfare 

JEL Classification

F12 R12 R13 



The idea of studying the productive role of land in the IRS sector and its impacts on economic agglomeration was first generated during my doctoral study. The author is grateful to Asao Ando, Tatsuhito Kono, Dao-Zhi Zeng and other committee members. The author thanks the editor and two anonymous referees for helpful comments and suggestions. The usual caveat applies. Financial support from National Natural Science Foundation of China (71663023, 71773042, 71863011, 71863010) is acknowledged.


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Copyright information

© The Japan Section of the Regional Science Association International 2019

Authors and Affiliations

  1. 1.School of International Trade and EconomicsJiangxi University of Finance and EconomicsNanchangChina
  2. 2.School of ManagementHarbin Institute of TechnologyHarbinChina

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