On the market failure of “missing pioneers”

Shang-Jin Wei, Ziru Wei and Jianhuan Xu

Journal of Development Economics, 2021, vol. 152, issue C

Abstract: 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” is a low-probability event for large countries, but can be a serious problem for small economies.

Keywords: Market failure; Economic development; Missing pioneer; Discovery cost (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:152:y:2021:i:c:s0304387821000808

DOI: 10.1016/j.jdeveco.2021.102705

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