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
DataReducedForm			10/31/2020 02:50:PM
Figures			12/18/2020 02:40:PM
ModelEstimation			10/31/2020 02:50:PM
Regressions			10/31/2020 02:53:PM
Readme.pdf	application/pdf	172.7 KB	12/18/2020 10:51:AM
figures.do	text/x-stata-syntax	7.4 KB	10/31/2020 10:50:AM
install_packages.do	text/x-stata-syntax	90 bytes	10/31/2020 10:50:AM
table4_matlab.m	text/x-objcsrc	7 KB	10/31/2020 10:50:AM
tables.do	text/x-stata-syntax	18.6 KB	10/31/2020 10:50:AM
tables7_8_11_12_matlab.m	text/x-objcsrc	4.6 KB	10/31/2020 10:50:AM

Project Description

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: Local protection; County border design; Trade barrier; Prisoner's dilemma

JEL Classification:
L10 Market Structure, Firm Strategy, and Market Performance: General
L50 Regulation and Industrial Policy: General

Geographic Coverage: China

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Published Versions

V1 [2021-10-25]

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