Discussion Paper Details

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Title: Assessing Market Failures in Export Pioneering Activities: A Structural Estimation Approach

Author(s): Shang-Jin Wei, Ziru Wei and Jianhuan Xu

Publication Date: October 2014

Keyword(s): discovery cost, industrial policy and knowledge spillover

Programme Area(s): Development Economics and International Trade and Regional Economics

Abstract: The paper provides a first structural-estimation-based assessment of an influential hypothesis that export pioneers are too few relative to social optimum due to knowledge spillover in new market explorations. Such market failure requires two inequalities to hold simultaneously: the discovery cost is greater than any individual firm'?s expected profit but smaller than the sum of all potential exporters' expected profits. Neither has to hold in the data. We estimate the structural parameters based on the customs data of Chinese electronics exports. While we find positive discovery cost and spillovers, "missing pioneers" are nonetheless a low probability event.

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Bibliographic Reference

Wei, S, Wei, Z and Xu, J. 2014. 'Assessing Market Failures in Export Pioneering Activities: A Structural Estimation Approach'. London, Centre for Economic Policy Research.