An economic analysis of the “Buy Local” trend

Abstract

This study develops a novel framework of heterogeneous consumers and producers to analyze the market and welfare impacts of the “Buy Local” trend. Analytical results show that the trend's impacts depend on the size and type of the locality; that is, whether the locality is an exporter or an importer of the relevant products. For instance, while the trend benefits both consumers and producers of large localities, it leaves producers of small exporting localities unaffected. The presence of the trend in large localities affects also outside consumers and producers with the welfare impact depending on the type of locality.