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

Shang-Jin Wei and Ziru Wei

No 10187, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Discovery cost; Industrial policy; Knowledge spillover (search for similar items in EconPapers)
JEL-codes: F10 F13 (search for similar items in EconPapers)
Date: 2014-10
New Economics Papers: this item is included in nep-tra
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Citations: View citations in EconPapers (1)

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