Market Power Of Chinese Dairy Industry Based On The Solow Residual Method

This paper aims to measure the market power of China’s dairy manufacturing industry,and empirically test which factors affects the market forces.This paper uses the method of the new industrial organization to do empirical research,on the basis of empirical results,the development of China’s dairy industry support,and puts forward the corresponding policy suggestions.Based on the production method proposed by Hall in 1959,Roger in 1995 to make a further amendment.This paper uses the Roger modified model to measure the market power,this model has the advantage of eliminating the unobserved productivity and the direct use of nominal variables measurement.In this paper,we use the data of the dairy industry in 1999-2011 to construct the regression model to measure the market power.In addition,there are three factors that may influence the market power,including ownership structure,import penetration,industrial concentration,firm size.The ownership structure of China’s dairy industry in the past twenty years of reform and opening up and changing constantly with the deepening reform of state-owned enterprises,state-owned enterprises in the dairy industry regardless of the absolute number or relative proportion are in decline,while the private share is a substantial increase in foreign invested enterprises also began to increase.In the structure of the market,the dairy industry concentration decreases,both the CR4 and the Herlinda index showed that the concentration reach the highest in 2006.In terms of dairy products import and export,China’s dairy manufacturing industry presents an absolute trade deficit,especially dry milk products such as milk powder,has shown rapid growth in recent years.Through the analysis of the factors that affect the market power,including industrial concentration,ownership structure,import penetration,enterprise size,etc.The results show that the degree of industrial concentration and market power in China’s dairy industry showed a negative correlation between industrial concentration degree,the cost effect may bring higher market power effect.The privatization of enterprises has a positive effect on market forces,and the penetration of imports is positively related to market forces.