Data and Code for: "Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market"

Principal Investigator(s):  View help for Principal Investigator(s) Panle Barwick, Cornell University, Economics Department; Shengmao Cao, Stanford University, Economics Department; Shanjun Li, Cornell University, Dyson School of Applied Economics and Management

Version:  View help for Version V1

Name File Type Size Last Modified
  CodeData_ICSPR 12/18/2020 03:51:PM

Project Citation: 

Barwick, Panle, Cao, Shengmao, and Li, Shanjun. Data and Code for: “Local Protectionism, Market Structure, and Social Welfare: China’s Automobile Market.” Nashville, TN: American Economic Association [publisher], 2021. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2021-10-25. https://doi.org/10.3886/E125703V1

Project Description

Summary:  View help for Summary 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. A salient feature of China's auto market is that vehicle models by joint ventures (JVs) and state-owned enterprises (SOEs) command much higher market shares in their headquarter provinces than at the national level.  Through county border analysis, falsification tests, and a consumer survey, we uncover protectionist policies such as subsidies to local brands as the primary contributing factor to the observed home bias. We then set up and estimate a market equilibrium model to quantify the impact of local protection, controlling for other demand and supply factors. Counterfactual analysis shows that local protection leads to significant consumer choice distortions and results in 21.9 billion yuan of consumer welfare loss,  amounting to 41% of total subsidy. Provincial governments face a prisoner's dilemma: local protection reduces aggregate social welfare, but provincial governments have no incentive to unilaterally remove local protection.

Scope of Project

Subject Terms:  View help for Subject Terms Local protection; County border design; Trade barrier; Prisoner's dilemma
JEL Classification:  View help for JEL Classification
      L10 Market Structure, Firm Strategy, and Market Performance: General
      L50 Regulation and Industrial Policy: General
Geographic Coverage:  View help for Geographic Coverage China
Time Period(s):  View help for Time Period(s) 1/1/2009 – 12/31/2011


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V1 [2021-10-25]

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