A fragmented China

This paper studies the degree of integration of China's domestic market and investigates the determinants of inter-provincial trade barriers under the rubric endogenoustrade policy theory. I rely on industry-level trade flows extracted from provincial input-output tables to develop a model that analyzes the magnitude and evolution of Chineseprovinces' engagement in domestic trade by computing all-inclusive indicators of tradebarriers. Results underline that over the 1990s, not only was China's domestic marketfragmentation along provincial borders great, but it also has become more severe atleast between 1992 and 1997. The investigation of province-level and industry-leveltrade barriers confirms the relevance of applying the framework of endogenous protection to explain the level of impediments to trade between Chinese provinces. Findingsemphasize that provinces' domestic trade protection pursues a dual objective of socioeconomic stability preservation and fiscal revenues maximization.