Working Paper: NBER ID: w29066
Authors: Qiaoyi Chen; Zhao Chen; Zhikuo Liu; Juan Carlos Surez Serrato; Daniel Xu
Abstract: We study a prominent energy regulation affecting large Chinese manufacturers that are part of broader conglomerates. Using detailed firm-level data and difference-in-differences research designs, we show that regulated firms cut output and shifted production to unregulated firms in the same conglomerate instead of improving their energy efficiency. Conglomerate spillovers account for 40% of the output loss of regulated firms and substantially reduce aggregate energy savings. Using a structural model, we show that alternative polices that use public information on business networks could lower the shadow cost of the regulation by more than 40% and increase aggregate energy savings by 10%.
Keywords: Energy Regulation; Conglomerates; Energy Efficiency; China
JEL Codes: H23; L51; O44; Q48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Regulation (L51) | Decrease in energy use (Q41) |
| Decrease in energy use (Q41) | Decrease in output (E23) |
| Conglomerate structure (L22) | Shift of production to unregulated firms (L59) |
| Alternative policies leveraging conglomerate networks (D85) | Enhanced energy savings (Q41) |
| Production shifts (L23) | Decrease in shadow cost of regulation (G18) |