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Export discoveries, diversification and barriers to entry


  • Klinger, Bailey
  • Lederman, Daniel


The literature on the relationship between economic diversification and development established that diversification rises with development up to a point. Some have argued that market failures reduce private investments that are necessary to find out whether a new product can be exported profitably, thus implying that the threat of entry can reduce export discoveries and consequently hamper diversification. In parallel, the trade literature on the "extensive margin" of trade has focused on the role of fixed costs of exporting, which affects the number and types of firms that enter into exporting activities. This article presents data suggesting that export diversification and export discoveries are correlated over the course of development, and it provides an empirical test of market failures that might deter export discoveries. The findings suggest that the threat of entry by imitators reduces the number of export discoveries within countries and industries for a given rate of growth of non-discovery exports. However, this market-failure effect is less pronounced when allowing for inter-industry spillovers, whereby export discoveries in one industry lead to discoveries in another industry. The policy implication is that barriers to entry should not be used to protect innovators from the threat of imitation, but governments could consider interventions that directly focus on stimulating export discoveries.

Suggested Citation

  • Klinger, Bailey & Lederman, Daniel, 2011. "Export discoveries, diversification and barriers to entry," Economic Systems, Elsevier, vol. 35(1), pages 64-83, March.
  • Handle: RePEc:eee:ecosys:v:35:y:2011:i:1:p:64-83

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    References listed on IDEAS

    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 1-37.
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    9. Mattias Ganslandt & James R. Markusen, 2001. "Standards and Related Regulations in International Trade: A Modeling Approach," NBER Working Papers 8346, National Bureau of Economic Research, Inc.
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    11. repec:hrv:faseco:30747190 is not listed on IDEAS
    12. Freund, Caroline & Pierola, Martha Denisse, 2010. "Export entrepreneurs : evidence from Peru," Policy Research Working Paper Series 5407, The World Bank.
    13. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-269, May.
    14. Easterly, William*Kraay, Aart, 1999. "Small states, small problems?," Policy Research Working Paper Series 2139, The World Bank.
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    Cited by:

    1. Roberto Alvarez & Rolando Campusano, 2014. "Does Competition Spur Innovation in Developing Countries?," Working Papers wp388, University of Chile, Department of Economics.
    2. Jouini, Nizar & Oulmane, Nassim & Peridy, Nicolas, 2014. "North African countries (NACs) production and export structure: Towards diversification and export sophistication strategy," MPRA Paper 62476, University Library of Munich, Germany.
    3. Bosupeng, Mpho, 2015. "On Exports and Economic Growth-Multifarious Economies Perspective," MPRA Paper 77922, University Library of Munich, Germany, revised 2015.
    4. Ricardo Argüello, 2017. "Trade diversification in Colombia, 1991-2011," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, vol. 36(71), pages 345-378, July.
    5. Giray Gozgor & Muhlis Can, 2016. "Effects of the product diversification of exports on income at different stages of economic development," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 215-235, August.
    6. Bosupeng, Mpho, 2015. "The Export-Led Growth Hypothesis: New Evidence and Implications," MPRA Paper 77917, University Library of Munich, Germany, revised Jun 2015.
    7. Auriol, Emmanuelle & Biancini, Sara & Paillacar, Rodrigo, 2015. "Intellectual Property Rights Protection and Trade," CEPR Discussion Papers 10602, C.E.P.R. Discussion Papers.
    8. Daniel Lederman & William F. Maloney, 2012. "Does What You Export Matter? In Search of Empirical Guidance for Industrial Policies," World Bank Publications, The World Bank, number 9371.
    9. Ndambendia, Houdou, 2014. "Exports diversification and knowledge sharing from south-south and south-north economic cooperation: evidence from the Central and West Africa," MPRA Paper 71571, University Library of Munich, Germany, revised 2015.
    10. Aleksandra Parteka, 2012. "Trade Diversity and Stages of Development–Evidence on EU Countries," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 30.
    11. UNDP Regional Bureau for Africa, "undated". "Understanding the Determinants of AfricaÕs Manufacturing Malaise," UNDP Africa Policy Notes 2017-06, United Nations Development Programme, Regional Bureau for Africa.
    12. Gnangnon, Kimm & Moser, Constance Besse, 2014. "Intellectual property rights protection and export diversification: The application of utility model laws," WTO Staff Working Papers ERSD-2014-19, World Trade Organization (WTO), Economic Research and Statistics Division.
    13. repec:sgh:gosnar:y:2017:i:2:p:5-27 is not listed on IDEAS


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