• The domestic market effect suggests that goods that have large economies of scale and high transport costs will tend to be produced and exported by countries with large domestic demand.

  • The internal market effect is part of the New Trade Theory and was developed as an explanation for the facts of world trade patterns that seemed to contradict comparative advantage.
  • Studies have confirmed the presence of domestic market effects and the types of economic factors that influence them.
  • Businesses and investors should take into account the possible benefits from the influence of the domestic market when choosing a location.