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Empirical Economics

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23.02.2019

Decomposing the effects of consumer boycotts: evidence from the anti-Japanese demonstration in China

Erschienen in: Empirical Economics | Ausgabe 6/2020

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Abstract

This paper quantifies the Chinese consumers’ boycott of Japanese cars that immediately followed the anti-Japanese demonstrations in September 2012. We decompose the total boycott effect into two effects: the transfer effect, which refers to consumers switching from Japanese to non-Japanese brands, and the cancellation effect, which captures decline in sales due to consumers exiting the market. We find that the cancellation effect accounts for more than 90% of the total decline in Japanese car sales, implying a small substitution effect in the automobile market, even though brands of all other countries have benefited. This paper provides evidence of both negative and positive impacts of political conflicts for different market participants and includes analysis with welfare implications.

Vorheriger Artikel The politics of environmental enforcement: the case of the Resource and Conservation Recovery Act

Nächster Artikel Income inequality, financial flows and political institution: sub-Saharan African financial network

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Recent literature has also analyzed how political conflicts affect economic relationships. See, for example, Fershtman and Gandal (1998), Michaels and Zhi (2010), Fuchs and Klann (2013), Li and Sacko (2002) and Davis and Meunier (2011).

Proxy boycotts can also occur in domestic politics. For example, Cuadras-Morató and Raya (2016) study the boycotts of Catalan sparkling wine in Spain.

Our data also cover the period of the “Senkaku Event” in 2010 that arisen from disputes over the Senkaku Islands, known as Diaoyu Islands in China. However, we find no evidence of negative impact resulted from the 2010 “Senkaku Event” in the Chinese automobile market.

We computed the size of Japanese imported cars as a percentage of “Made in China” Japanese cars using data from UN Comtrade (HS code 8703) and our data and find that imported cars account for less than 10% of Japanese car sales in China.

Studies of the automobile industry are abundant in the economics literature. See, for example, Bandeen (1957), Sheahan (1960), Hess (1977), Berkovec (1985), Bresnahan (1987), Cooper and Haltiwanger (1993), Ries (1993), Berry et al. (1995) and Park (2003), covering a variety of topics. In addition, Depner and Bathelt (2005), Deng and Ma (2010), Luong (2013) and Hu et al. (2014) provide analyses of various aspects of the Chinese automobile industry.

CAAM also reports the sales of Jiaocha cars, which are designed for both cargo and passenger purposes. This type of car is specially designed for the Chinese market, especially in the rural areas. Since they are not general passenger cars, and there is no foreign-brand cars in this category, we exclude them from our sample.

See Heilmann (2016) for more details of the boycotts of Japanese products.

Tables 7 and 8 in “Appendix B” give results of the relevant unit root tests, as well as AIC and BIC values for the selections of optimal degrees and lags.

The basic fixed effect regression with common trend is

$$\begin{aligned}Y_{it}=\alpha _{i}+\lambda _{t}+{\hat{\rho }} D_{it}+\varepsilon _{it},\end{aligned}$$

while the regression with unique trends is

$$\begin{aligned} Y_{it}=\alpha _{i}+\bar{\lambda _{t}}+ {\tilde{\lambda }}_t D_{it} + {\tilde{\rho }} D_{it}+\varepsilon _{it}, \end{aligned}$$

where $\alpha _{i}$ and $\lambda _{t}$ indicate the group fixed effect and the time fixed effect and $D_{it}$ is a dummy variable that equals 1 for the treatment group after policy and 0 otherwise. In the second regression, $\bar{\lambda _{t}}$ denotes the collection of trends of the non-treatment groups while $\lambda _t D_{it}$ is the unique trend of the treatment group. With the common trend regression, ${\hat{\rho }}$ gives the estimate of ATE. However, if the unique trend model is the true model, then ${\hat{\rho }}$ would be overestimated because its value is equal to ${\tilde{\lambda }}_t + {\tilde{\rho }}$ from the regression with unique trend.

Please see “Appendix A” for additional detail.

Equation (8) relies on $t_0$, a reference time period. In Sect. 4.1, two specifications of $t_0$ are presented.

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Titel: Decomposing the effects of consumer boycotts: evidence from the anti-Japanese demonstration in China
Publikationsdatum: 23.02.2019
Erschienen in: Empirical Economics / Ausgabe 6/2020
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-019-01650-3

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