Competition Policy and Trade Barriers: Empirical Evidence from China

Abstract

This paper examines the impact of competition policy on inter-regional trade barriers among provinces in China. Using data from 28 Chinese provinces for the period 1994–2013, we show that the implementation of competition policy—as measured by a number of indices that we construct—can effectively reduce inter-regional trade barriers. We provide results that are based on both fixed effects and instrumental variables estimators to support the causal nature of the established link. The effect is found to be more salient for provinces with a less corrupt political environment. The results are also shown to be robust across alternative specifications, alternative measures of competition policy, and inter-regional trade barriers.