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Factor substitution and energy productivity fluctuation in China: A parametric decomposition analysis

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  • Wang, Qunwei
  • Zhang, Cheng
  • Cai, Wanhuan

Abstract

Technical research on energy productivity can support government officials as they evaluate practical energy policies for the future. This study proposed a parametric method to decompose China's energy productivity rate of change into six factors based on a theoretical stochastic frontier analysis. The method was applied to conduct an empirical study using inter-provincial panel data in China from 1995 to 2012. The results highlighted three key points. First, the general rate of change in energy productivity was mainly influenced by a steady positive rate of change in technical progress, combined with a steady negative rate of change in technical efficiency. The core factors causing fluctuations in energy productivity included: a positive rate of change in the substitution of capital and energy, and a negative rate of change in the substitution of labor and energy. Second, from a geographic perspective, provinces with a high rate of change in technical progress experienced a weaker deterioration in technical efficiency. However, the rate of change in technical efficiency tends to decline as the rate of change in technical progress increases. Third, there is a similar changing trend between the substitution of capital and energy and the substitution of labor and energy.

Suggested Citation

  • Wang, Qunwei & Zhang, Cheng & Cai, Wanhuan, 2017. "Factor substitution and energy productivity fluctuation in China: A parametric decomposition analysis," Energy Policy, Elsevier, vol. 109(C), pages 181-190.
    • Handle: RePEc:eee:enepol:v:109:y:2017:i:c:p:181-190
    DOI: 10.1016/j.enpol.2017.07.003
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