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- Title
Do subsidies cause a less competitive milk market in China?
- Authors
Chen, Yuquan; Yu, Xiaohua
- Abstract
After 2008, China dairy industry has experienced a consolidation supported by the government mainly for the reason of food safety. Subsidies are one of the tools to shape a concentrated market with goals of reducing regulation cost and accomplishing quality control. This gives a serious concern that subsidies would generate a less competitive dairy industry. We construct a parametric model and use the firm‐level panel data, specifically the top eight dairy firms, to test if government subsidies strengthen the market power in the dairy industry. Our empirical results indicate government subsidies have a negative impact on the Lerner index for the top privately owned firms, but no significant effect on state‐controlled ones after controlling for advertising, time trend, and proprietorship. It is possible that the subsidies give more room for private firms to increase the scale or suppress the price, which eventually reduces the market power and benefits dairy customers in the downstream.
- Subjects
DAIRY industry; SUBSIDIES; MARKET power; FOOD safety; MILK quality
- Publication
Agricultural Economics, 2019, Vol 50, Issue 3, p303
- ISSN
0169-5150
- Publication type
Article
- DOI
10.1111/agec.12485