Export registration in the automobile industry: Effects on manufacturer-intermediary match efficiency

Research Project

Project/Area Number	19K13711
Research Category	Grant-in-Aid for Early-Career Scientists
Allocation Type	Multi-year Fund
Review Section	Basic Section 07040:Economic policy-related
Research Institution	Asian Growth Research Institute
Principal Investigator	sun xiaonan 公益財団法人アジア成長研究所, 研究部, 客員研究員 (80816174)
Project Period (FY)	2019-04-01 – 2022-03-31
Project Status	Completed (Fiscal Year 2021)
Budget Amount *help	¥4,160,000 (Direct Cost: ¥3,200,000、Indirect Cost: ¥960,000) Fiscal Year 2021: ¥1,300,000 (Direct Cost: ¥1,000,000、Indirect Cost: ¥300,000) Fiscal Year 2020: ¥1,040,000 (Direct Cost: ¥800,000、Indirect Cost: ¥240,000) Fiscal Year 2019: ¥1,820,000 (Direct Cost: ¥1,400,000、Indirect Cost: ¥420,000)
Keywords	trade intermediary / matching / export regulation / intermediary / export / automobile / efficiency / match
Outline of Research at the Start	This research aims to examine the pattern of matching between manufacturers and intermediaries before and after export regulation for automobile industry in China. It tries to investigate how trade policy affects the profit sharing and total well-being of the industry by using an economic model.
Outline of Final Research Achievements	In 2007, China implemented a policy requiring automobile producers to distribute through at most three trade intermediaries and list their intermediaries on a registry. Motivated by the registration requirements and granularity in the order sizes handled by most intermediaries, this paper develops a model to describe the matches between automakers and intermediaries. The model shows market division arises endogenously due to the regulation. It creates inefficiencies in matching and double marginalization. The model predictions coincide with a number of stylized facts: a strong decline in the number of auto intermediaries, assortative matching, export price increases for intermediaries, and substantial churning in the sets of intermediaries registered by the automakers. Welfare analysis in terms of total profits shows that this regulation benefits automakers, especially those relatively less efficient ones while intermediaries are made worse off.
Academic Significance and Societal Importance of the Research Achievements	This paper takes advantage of the automaker-intermediary matching data to provide evidence on the economics underlying the linkages among domestic producers and export intermediaries. Predictions from the model show that this regulation benefited automakers and made intermediaries worse off.