Sizing up Market Failures in Export Pioneering Activities

Shang-Jin Wei, Ziru Wei, Jianhuan Xu

NBER Working Paper No. 23893
Issued in October 2017
NBER Program(s):Development Economics, International Trade and Investment

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.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23893

Users who downloaded this paper also downloaded* these:
Pavcnik w23878 The Impact of Trade on Inequality in Developing Countries
Jiao and Wei w24052 Intrinsic Openness and Endogenous Institutional Quality
Wang, Wei, Yu, and Zhu w23261 Characterizing Global Value Chains: Production Length and Upstreamness
Eckel and Yeaple w23834 Too Much of a Good Thing? Labor Market Imperfections as a Source of Exceptional Exporter Performance
Hansman, Hjort, León, and Teachout w23949 Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us