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Does the centralized slaughtering policy create market power for pork industry in China?

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  • Chen, Yuquan
  • Yu, Xiaohua

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.

Suggested Citation

  • Chen, Yuquan & Yu, Xiaohua, 2018. "Does the centralized slaughtering policy create market power for pork industry in China?," China Economic Review, Elsevier, vol. 50(C), pages 59-71.
  • Handle: RePEc:eee:chieco:v:50:y:2018:i:c:p:59-71
    DOI: 10.1016/j.chieco.2018.03.005
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    1. Musa Abdu & Adamu Jibir, 2019. "Sources of Market Power among Firms in Sub-Saharan Africa: Do Institutions Matter in Competitive Policies?," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 24(2), pages 115-148, July-Dec.
    2. Liwen Ling & Dabin Zhang & Shanying Chen & Amin W. Mugera, 2020. "Can online search data improve the forecast accuracy of pork price in China?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(4), pages 671-686, July.

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    More about this item

    Keywords

    Pork industry; Centralized slaughtering policy; China; Market power;
    All these keywords.

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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