Sizing up Market Failures in Export Pioneering Activities / Shang-Jin Wei, Ziru Wei, Jianhuan Xu.

Format:

Book

Author/Creator:

Wei, Shang-Jin.

Contributor:

National Bureau of Economic Research.

Wei, Ziru.

Xu, Jianhuan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23893.

NBER working paper series no. w23893

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

We argue that existence of public good does not necessarily imply market failure, and illustrate this point in the context of international trade. An influential hypothesis states that export pioneers are too few relative to social optimum because the first exporter's action creates an informational public good for all subsequent exporters. The hypothesis has been invoked to justify certain types of government interventions. We note, however, that such market failure requires two inequalities to hold simultaneously: the discovery cost is neither too low nor too high. Neither has to hold in the data. We propose a structural estimation framework to evaluate the hypothesis, and estimate the parameters based on the customs data of Chinese electronics exports. Our key finding is that "missing pioneers" are a low-probability event for large countries, but can be a serious problem for small economies.

Notes:

Print version record

October 2017.