Do subsidies cause a less competitive milk market in China?
利用中国前八大乳品企业面板数据，研究政府补贴对市场力量的影响，发现补贴降低了民营企业的勒纳指数，但对国有企业无显著影响。
Abstract After 2008, China dairy industry has experienced a consolidation supported by the government mainly for the reason of food safety. Subsidies are one of the tools to shape a concentrated market with goals of reducing regulation cost and accomplishing quality control. This gives a serious concern that subsidies would generate a less competitive dairy industry. We construct a parametric model and use the firm‐level panel data, specifically the top eight dairy firms, to test if government subsidies strengthen the market power in the dairy industry. Our empirical results indicate government subsidies have a negative impact on the Lerner index for the top privately owned firms, but no significant effect on state‐controlled ones after controlling for advertising, time trend, and proprietorship. It is possible that the subsidies give more room for private firms to increase the scale or suppress the price, which eventually reduces the market power and benefits dairy customers in the downstream.