Industrial agglomeration policies may limit competition. This study develops, validates, and applies a novel approach for measuring competition based on the comovement of markups and market shares among firms in the same location and industry. Then this study develops a model of how this reduction in competition affects aggregate income. In this paper, the authors apply their approach to the well-known special economic zones (SEZs) of China. This paper estimates that firms in SEZs exhibit cooperative pricing almost three times as intensively as firms outside SEZs.
This article investigates how transportation networks shape firms' geographic footprint by reducing monitoring costs of distant investments. Exploiting the staggered expansions of China's passenger high-speed rail (HSR) network, the authors document that the amount of intercity investment between a pair of cities increases by 45% with the introduction of an HSR line connecting the cities. They enhance the causal inference by applying high-dimensional fixed effects, and focusing on city pairs that are "accidentally" connected in the network.