Finance & Trade Economics, 2017, Issue 8

Authors: LV Yunlong, LV Yue

Abstract: This paper study upstream monopoly’ impact on the comparative advantage of manufacturing industry. Theoretical analysis shows that the upstream monopoly affects comparative advantage of manufacturing industry through intermediate input price and productivity. Based on the theoretical model, Chinese Industrial Enterprises Database, the China Statistical Yearbook on Science Technology and WIOD Database, this paper calculates the RCA, TC and MI indexes based on value added trade and take them as proxy variable of industry’s comparative advantage to empirically examine the effect of upstream monopoly on comparative advantage of manufacturing industry. The empirical results show that the upstream monopoly extent can reduce comparative advantage of manufacturing industry, and it remains robust after controlling other factors that influence international competitiveness, endogenous problem and measuring error. Upstream monopoly affects comparative advantage of manufacturing industry through the channels of intermediate input price and productivity. In addition, the increase of the downstream industry competition degree could suppress the upstream monopoly' negative impact of manufacturing industry, and government subsidies will aggravate the negative influence of upstream monopoly. Therefore, to promote the market-oriented reform and break the market monopoly of the upstream industry has important policy implications for China to build competitive advantage.

Keywords: Upstream Monopoly, Comparative-Advantage, Intermediate Goods