The home market effect (HME) reveals how industrial location depends on country size. One-factor or immobile-labor models are employed in early studies of the HME, in which the transport costs of the homogeneous good are found to be essential. In more recent literature, two-factor models, with...

In the literature of new trade theory, most papers study the industrial location by imposing the assumption of free transportation in the agricultural sector. This paper explicitly incorporates arbitrary transport costs in both the manufacturing and the agricultural sectors into the...