The Causes And Effects Of Administrative Monopoly In Transition Economy

This paper is an analysis on administrative monopoly occurring in the transition economy. According to the scope of effects, administrative monopoly can be sorted as two types:industrial administrative monopoly and local administrative monopoly. We first analyzed the causes and effects of this phenomenon, and then specified the relationship between administrative monopoly and production inefficiency.Based on the domestic academic article, this paper gave a review on the manifestation, causes and effects of industrial administrative monopoly. As a conclusion, industrial administrative monopoly is the outcome of the collusion between the government and firms, and it now acts mainly as unreasonable industrial policy and invalid regulation which interfere with the normal operation of the market mechanism and cause social welfare lost.This paper specified the utility function of local governments, analyzed the procedure that local governments competed with each other by interfering with the facts price system across provinces, and gave the reason why there was market segmentation. Then, we pointed out the adverse effects caused by local administrative monopoly.Industrial administrative monopoly and local administrative monopoly also have something in common. For example, they both have negative effects on the industrial production cost. Concretely, administrative monopoly will lead to not only unreasonable industry property rights structure but also facts market segmentation which both cause a high production cost. This paper established an index system of the administrative monopoly, computed the administrative monopoly index by China's industrial branch, and calculated the cost inefficiency of some representative industries.