Krugman's model of trade between two countries of unequal size predicts that the country with the relatively large number of consumers is the net exporter and host of a disproportionate share of firms in the differentiated good sector. He terms these results home market effects. This paper...

McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this paper data on bilateral trade flows between 94 French regions, for 10 industries and 2...