Market Competition And Economic Performance: An Empirical Analysis Of China's Industrial,

According to the theory of contestable market, performance of firms or industries is affected to a large extent by the markets' contestability. Even there are a small amount of firms in a certain market, as long as the market is contestable, the potential entrants' threaten makes the incumbents operate just as they are in perfectly competing circumstances. On the contrary, if there are high barriers to entry and low contestability, incumbents will always abuse their market power and incur some kinds of efficiency losses. In his thesis, the author takes China's industry as an example to test above assertions.To evaluate markets' contestability, the author discusses the relation between state ownership and contestability. He asserts that, state ownership affects contestability in several ways, and the existence of state ownership restricts contestable levels. Taking account of the difficulties in looking for relevant data, this thesis regards the ratios of non-state-owned economy as the indexes of industries' contestability. In China today, the domestic markets are fragmented seriously, and the progresses of marketization vary significantly.. Accordingly we must take regional differences into account when we analyzing industrial characteristics. Here the author measures the regional markets' contestability with the marketization index of respective regions, and he also evaluates the interlaced markets' contestability objectively.By the help of econometrical methods, and mainly through computing total factor productivity (TFP), this research evaluates relevant markets' performances. Of course, the author also makes use of the single factor index to compare the different performances.Although the market-oriented reform has made big progress, and the overall contestable level also has been promoted significantly, there are still many obstacles to promote contestability further in China's industries.As the empirical analyses reveal, we draw the following major conclusions:I . It's not strange that the single factor productivity index cannot tell us the relation between contestability and performance with confidence. But if we take into account of the capital input and labor input simultaneously, we can certainly see that, TFP varies positively with the contestability. We also find that, state ownership gets poor achievements because of its various problems.