Abstract
In order to ensure safe meat supply and protect consumers' health, the government of China made a law in 1997 which started to enforce centralized slaughtering of hogs in licensed slaughtering houses. We use a structural model and the industrial level data to test the hypothesis that whether the “centralized slaughtering policy” creates market power. The results detect sizable and significant market power (about 0.5% price margin) for the slaughtering industry in the pork supply chain, mainly due to high barriers of entry and stringent license regulations which reduce competition in the market. The total profit markup for the slaughtering industry reaches 1.85 billion yuan just in 2016. The welfare transfer and loss from market power should be taken into account for such a policy making.
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