Effects of Industrial Protection Policies on Firms’ Incentives and Consumer Welfare

Qimou Song; Ben Wu

doi:10.54691/bcpbm.v32i.2877

Authors

Qimou Song
Ben Wu

DOI:

https://doi.org/10.54691/bcpbm.v32i.2877

Keywords:

Industrial Protection Policies; Chinese Movie Industry; Natural Language Processing (NLP); Sentiment Analysis; Consumer Welfare; Difference-in-Difference (DID).

Abstract

Industrial protection policies have been widely implemented to protect domestic firms from foreign competition. This project specifically focused on examining the effects of the Domestic Movie Protection Month Policy that started in China in 2014. First, I demonstrated the existence of this policy by measuring the obvious delay of foreign movies during the summer (July and August) after 2014. Second, I compared the quality of domestic movies released during the summer (treatment group) with movies released at other times of the year (control group) to evaluate the effect of the policy. Two proxies for movie quality and consumer welfare were constructed for robustness checks: (1) Douban rating, which is the general rating of the entire population of the audience on Douban website, the biggest movie rating website in China; (2) Welfare Index which is based on the sentiment analysis constructed by the NLP (Natural Language Processing) of around 70,000 consumers’ comments. The final result showed that the Douban rating and Welfare Index were both significantly higher for domestic movies released during the summer after 2014 than before 2014, while the quality of movies in the control group remained unchanged. This finding supports the hypothesis that domestic firms will have more incentives to invest in quality upgrading if the industrial protection policy is implemented. This conclusion also adds to the recent heated discussions on whether policymakers shall continue to implement industrial protection policy not only in the movie industry but also in other industries that face severe foreign competition.

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