Abstract | Based on the classic home market effects model, this paper relaxed the assumption of homothetic preferences, combined CD-CES utility function with Stone-Geary preferences, and built service trade model under the non-homothetic preferences; then, it decomposed the relative total demand into relative demand scale and demand structure, and deduced the conditions of relative demand scale and demand structure on home market effects in theory. Furthermore, it also used the bilateral trade data between China and 38 countries or regions from 1995 to 2011, adopted panel threshold model to discuss threshold effect of service exports to test the nonlinear home market effects empirically for the first time. In this paper, it was found that: under the non-homothetic preferences, China’s overall services showed significant home market effects resulting from demand scale and adverse home market effects resulting from demand structure, and the latter showed significant nonlinear characteristics, namely the effect of relative demand structure on the relative service export would change with the variation of the relative market size, when the market size was larger, the reverse effect of relative demand structure was stronger. In sectors, the demand structures of the producer services and consumer services were changing with the market size to show the phased characteristics. The two kinds of effects of producer services and the overall services were consistent, and the two kinds of effects in different producer segment services showed similar direction but different intensity; For consumer services, when the market scale was smaller, they only had the positive home market effect resulting from demand structure, but different consumer segment services had significant different effects. On this basis, it would have important policy implications for China towards a great service country and even big power by expanding domestic demand, combined with the supply side reform to force services innovation, constructing the foreign trade growth and income equitable distribution of parallel public incentive policy systems. |