RegionalCompetitionandLocalProtectionismZhongXiaohanNationalCenterforEconomicResearchatTsinghuaUniversity,NCERAbstract:ThispaperdevelopedasimplemodeltodiscusstheeconomicconsequencesofregionalcompetitionandlocalprotectionismunderthedecentralizationreforminChina.Withthetechnologyofdecreasingreturntoscales,decentralizationsdoimprovesocialwelfare;however,withincreasingreturntoscales,decentralizationmaydeterioratewelfare.Localprotectionismfurtherunderminesbenefitsfromdecentralization.Inmanytimes,itmakesdecentralizationevenworsethancentralizednationalmonopoly.KeyWords:Regionalcompetitions,LocalProtectionism,Monopoly,Oligopoly,GovernmentGovernanceJELClassifications:H7,R58,L12,L131I.(Che&Qian,1998;Qian&Roland,1998)Young,2000II.(i=1,2)(),1,2.iiiipqabqi=−=(1)a1=a2=a,b1=b2=b2.1()21,1,22iiicqcqi==,(2)c1=c2=c.1,2122.1.1a/(b+c)2a/(b+c)32.1.2“Paternalism”Kornai,1983Shleifer&Vishny,19922*a/(2b+c)2.1.311contestablemarket231232.1.42*a/(1.5b+c)222.1.5342.2cfi,i=1,2cf1=cf2=cf2.2.1cf2a/b2.2.2a/b2.2.31cfa2/2bcf52cfa2/2bcfa2/b1’1’2.2.4(2/3)*(a/b)[a2/(4.5b)-cf]14a2/(4.5b)-cf0a2/(2b)-cf0chicken2’2’2.2.5a/2b(a2)/(4b)-cfa2/(2b)-cf(a2)/(4b)-cfa2/(4.5b)-cfa2/(2b)-cf(a2)/(4b)-cfa2/(4.5b)-cf0a/bcfa2/(2b)-cf(a2)/(4b)-cf0a2/(4.5b)-cf48a2/(9b)-2cf(3a2)/(4b)-cf(5a2/36b)cf6a2/(2b)-cf0(a2)/(4b)-cfa2/(4.5b)-cf0a2/(2b)-cf(a2)/(4b)-cfa2/(4.5b)-cfa2/b-cf0a2/(2b)-cf3’3’III.712*a/(b+c)a2c/[(b+c)2]a2/(b+c)2*a/(2b+c)a2/(2b+c)a2(3b+c)/[(2b+c)2]2*a/(b+c)a2c/[(b+c)2]a2/(b+c)2*a/(1.5b+c)a2(b+c)/[(1.5b+c)2]a2(2b+c)/[(1.5b+c)2]2*a/(2b+c)a2/(2b+c)a2(3b+c)/[(2b+c)2]22*a/b-cfa2/b-cfa/b(a2)/(2b)-cf(3a2)/(4b)-cf2*a/b-cfa2/b-cf(4/3)*(a/b)2*[a2/(4.5b)-cf]8a2/(9b)-2cfa/b2*[(a2)/(4b)-cf](3a2)/(4b)-2*cfChe,Jiahua,andYingyiQian(1998):InsecurePropertyRightsandGovernmentOwnershipofFirms,QuarterlyJournalofEconomics,113:2,pp.467-496.Kornai,Janos;Weibull,JorgenW(1983):“Paternalism,Buyers'andSellers'Market,”MathematicalSocialSciences,6:2,pp.153-169.Qian,Yingyi,andGerardRoland(1998):FederalismandtheSoftBudgetConstraint,AmericanEconomicReview,88:5,pp.1143-1162.Shleifer,Andrei,andRobertVishny(1992):PervasiveShortagesunderSocialism,TheRandJournalofEconomics,23:2,pp.237-246.Young,Alwyn(2000):“TheRazor'sEdge:DistortionsandIncrementalReforminthePeople'sRupublicofChina”,QuarterlyJournalofEconomics,115:4,pp.1091-1135.