CEPII - Market Potentials

Market Potentials offers six distinct indices of proximity to world markets for more than 150 countries from 1960 to 2009.

Since the early 1990s’ international trade analyses has emphasized how proximity to large markets determines economic development and shapes international trade patterns.

CEPII’s Market Potential database reports the two measurements of market potentials synthesizing the evolution of countries’ economic geography. The database contains 6 distinct measures of Market Potential for a very large set of countries (between 152 and 205, depending of the year) from 1960 to 2003.

A companion dataset offering market potentials at industrial level (27 industries) and covering a more limited period (1980-2003) is also available (rmp_ind.dta). It is based on TradeProd, a CEPII dataset matching trade at 3-digit ISIC Rev 2. The advantage of industry-specific market potentials is to present a more detailed picture of the evolution of countries’ economic geography .

Reference document to cite: Mayer, T. (2008) Market Potential and Development. CEPII Working Paper 2009-24

Person in charge & contact: Thierry Mayer, marketpotentials

cepii.fr

Licence: Etalab 2.0

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A description of these measures is in the document World_NEG.pdf.

DTA FILES:
rmp_cepii.dta
rmp_ind.dta

TXT FILES:
rmp_cepii.txt
rmp_ind.txt

The variables are:

RMP_RV	Real Market Potential computed using Redding and Venables (2004)’s method
FMP_RV	Foreign Market Potential computed using Redding and Venables (2004)’s method (i.e. Market Potential which does not include own demand of the country).
RMP_HM	Real Market Potential computed using Head and Mayer (2004)’s method
FMP_HM	Foreign Market Potential computed using Head and Mayer (2004)’s method (i.e. Market Potential which does not include own demand of the country).
RMP_IV1	IV for Real Market Potential (instrument = Sum of bilateral distances)
RMP_IV2	IV for Real Market Potential (instrument = Sum of estimated bilateral trade costs)

CountRy codes can be found in geo_cepii.xls and geo_cepii.dta.

Methodology

Building on New Economic Geography models, empirical analyses have proposed meaningful estimates of each country’s proximity to world markets, usually labeled Market Potential. Redding and Venables (Journal of International Economic, 2004, 62: 53-82) estimate an indicator of market potential as a sum of expenditure of all countries in the world, weighted by bilateral trade costs. Head and Mayer (The Review of Economics and Statistics, 2004, 86(4): 959-972) propose a related but alternative methodology, adjusting the market potential measurement to take into account the impact of national borders on trade flows.