Home Market Effect

The home market effect was originally hypothesized by Staffan Linder in 1961 and formalized by Paul Krugman in 1980. The central tenet of the hypothesis is that countries with larger sales of some products at home will tend to have larger sales of those same products abroad. It is part of New Trade Theory, which is predicated on economies of scale and network effects, rather than more traditional trade models based on comparative advantage.