Agglomeration, Misallocation, and (the Lack of) Competition
American Economic Journal: Macroeconomics
vol. 13,
no. 4, October 2021
(pp. 483-519)
Abstract
Industrial agglomeration policies may limit competition. We develop, validate, and apply a novel approach for measuring competition based on the comovement of markups and market shares among firms in the same location and industry. Then we develop a model of how this reduction in competition affects aggregate income. We apply our approach to the well-known special economic zones (SEZs) of China. We estimate that firms in SEZs exhibit cooperative pricing almost three times as intensively as firms outside SEZs. Nevertheless, we model the aggregate consequences of SEZs and find positive effects because markups become higher but also more equal.Citation
Brooks, Wyatt J., Joseph P. Kaboski, and Yao Amber Li. 2021. "Agglomeration, Misallocation, and (the Lack of) Competition." American Economic Journal: Macroeconomics, 13 (4): 483-519. DOI: 10.1257/mac.20180443Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- L60 Industry Studies: Manufacturing: General
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- P25 Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics
- P31 Socialist Enterprises and Their Transitions
- R32 Other Spatial Production and Pricing Analysis
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