Does administrative monopoly regulation affect cross-regional resource allocation?

Abstract

Utilizing China's Fair Competition Review System (FCRS) as a quasi-natural experiment, our study explores the relationship between administrative monopoly regulation and firms' cross-regional resource allocation. By analyzing data from China's listed firms from 2009 to 2022, we find that the FCRS significantly enables firms to diversify their customer bases across regions, facilitated by reduced transaction costs and enhanced market competition. Additionally, the FCRS boosts both the sales revenue and rankings of cross-regional customers. Moreover, the positive effects of the FCRS are especially pronounced in regions where the policy is implemented more robustly. Our research contributes to the understanding of how governmental actions impact resource allocation and highlights a novel micro-level mechanism that promotes the development of a unified domestic market.