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A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration

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  • Sandra Poncet

Abstract

This paper studies the degree of integration of China's domestic market and investigates the determinants of inter-provincial trade barriers under the rubric endogenous trade policy theory. I rely on industry-level trade flows extracted from provincial input-output tables to develop a model that analyzes the magnitude and evolution of Chinese provinces' engagement in domestic trade by computing all-inclusive indicators of trade barriers. Results underline that over the 1990s, not only was China's domestic market fragmentation along provincial borders great, but it also has become more severe at least between 1992 and 1997. The investigation of province-level and industry-level trade barriers confirms the relevance of applying the framework of endogenous protection to explain the level of impediments to trade between Chinese provinces. Findings emphasize that provinces' domestic trade protection pursues a dual objective of socio-economic stability preservation and fiscal revenues maximization. Copyright Blackwell Publishing Ltd 2005..

Suggested Citation

  • Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, August.
  • Handle: RePEc:bla:reviec:v:13:y:2005:i:3:p:409-430
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    1. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
    2. John F. Helliwell, 1997. "National Borders, Trade and Migration," NBER Working Papers 6027, National Bureau of Economic Research, Inc.
    3. Françoise Lemoine & Deniz Ünal-Kesenci, 2002. "China in the International Segmentation of Production Processes," Working Papers 2002-02, CEPII research center.
    4. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
    5. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
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