Agglomeration, Misallocation, and (the Lack of) Competition

Industrial agglomeration policies may limit competition. We develop, validate, and apply a novel approach for measuring competition based on the comovement of markups market shares among firms in same location industry. Then we develop model how this reduction affects aggregate income. our to well-known special economic zones (SEZs) China. estimate that SEZs exhibit cooperative pricing almost three times as intensively outside SEZs. Nevertheless, consequences find positive effects because become higher but also more equal. (JEL D22, L60, O14, O18, P25, P31, R32)