NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Shengmao Cao

Economics Department
Stanford University
Stanford, CA 94305

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NBER Working Papers and Publications

August 2017Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market
with Panle Jia Barwick, Shanjun Li: w23678
While China has made great strides in transforming its centrally-planned economy to a market-oriented economy, there still exist widespread interregional trade barriers, such as policies and practices that protect local firms against competition from non-local firms. This study documents the presence of local protectionism and quantifies its impacts on market competition and social welfare in the context of China’s automobile market. This market exhibits a salient feature that vehicle models by joint ventures (JVs) and especially state-owned enterprises (SOEs) command much higher market shares in their headquarter province than at the national level. Through spatial discontinuity analysis at provincial borders, falsification tests, and consumer surveys, we first confirm protective policies...
 
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