Why the Entry Regulation of Mobile Phone Manufacturing in China Collapsed: The Impact of Technological Innovation
This paper analyzes why an entry regulation that generated large rents was abruptly abolished. We argue that the rents supporting the regulation dissipated because a new technology encouraged illegal entry by raising the cost of enforcement. In 1998, China introduced a licensing system for the manufacturing of mobile phones. This system created large monopoly rents for those who received the licenses. Later, in 2003, an integrated chip was invented that significantly lowered the costs of manufacturing mobile phones. Immediately thereafter, thousands of unlicensed manufacturers started producing mobile phones. The manufacturers who had been licensed previously suffered large losses from this competition, and many went bankrupt. The new chip technology raised the cost of enforcement by making entry extremely cheap. The regulators turned to local governments and telephone network operators for assistance in suppressing the illegal phones, but both groups did not cooperate because they benefited from the flourishing illegal phone industry.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
- Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
- Jarrell, Gregg A, 1984. "Change at the Exchange: The Causes and Effects of Deregulation," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 273-312, October.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:doi:10.1086/662991. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.