Market Failure

Market Failure

Market Imperfections or Market Failure and International Trade Economy

In relation to international trade economy, Christopher Mark (1993) provided the following definition of Market Imperfections or Market Failure: Often refers to two sources of departure from perfect competition, i.e., externalities and increasing returns to scale. Traditional international trade models do not take market imperfections fully into account, but are based on assumptions that perfect competition and constant returns to scale prevail in every market. Such models consequently may be inadequate for analyzing trade in such key sectors as aircraft, telecommunications equipment, semiconductors, and pharmaceuticals –where oligopolistic competition and substantial economies of scale frequently occur –as well as in other industries in which accrued knowledge, the learning curve,and R&D play an important role. See strategic trade policy.

Literature Review on (Policy Analysis) Theories of Market Failure

In the Encyclopedia of Public Administration and Public Policy, [1] Brian E. Dollery and Joe L. Wallis provide the following summary about the topic of (Policy Analysis) Theories of Market Failure: The appropriate role of government in contemporary advanced industrial democracies is a complex and controversial issue that remains unsettled. A vast research effort has been devoted to resolving this issue. Social scientists, including anthropologists, economists, policy analysts, political scientists, public administration specialists, and sociologists, have devised numerous approaches to the study of the nature and role of government, with varying degrees of success. One of the more successful approaches to the analysis of the state has been developed by welfare economists in the form of the theory of market failure. In essence, the market failure paradigm examines the operation of the economy and prescribes government intervention when markets “fail” on the grounds of either economic efficiency or equity.


Notes and References

  1. Entry about (Policy Analysis) Theories of Market Failure in the Encyclopedia of Public Administration and Public Policy (2015, Routledge, Oxford, United Kingdom)

See Also

Further Reading

  • Global Encyclopedia of Public Administration, Public Policy, and Governance (2018, Springer International Publishing, Germany)



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