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Account for sector heterogeneity in China's energy consumption: Sector price indices vs. GDP deflator

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  • Ma, Chunbo

Abstract

A common practice in decomposition analyses is to deflate output indicators to purge the impact of inflation by using a general deflator. This practice fails to account for sector heterogeneity and can be hazardous. Although the general identified patterns are largely correct, the calculated magnitudes can be misleading or even wrongly signed. Instead, it is strongly recommended that sector heterogeneity is accounted for by using individual sector price indices for all relevant sectors instead of one general (GDP) deflator. This paper analyzes this advanced decomposition using Chinese data and compares to the usual method of using only one deflator. It is found that while most differences are only of quantitative quality, some show even a qualitative difference. Furthermore, the rising energy intensity in the early 2000s, which has been discussed by previous studies, vanishes completely.

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  • Ma, Chunbo, 2010. "Account for sector heterogeneity in China's energy consumption: Sector price indices vs. GDP deflator," Energy Economics, Elsevier, vol. 32(1), pages 24-29, January.
    • Handle: RePEc:eee:eneeco:v:32:y:2010:i:1:p:24-29
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    6. Xu, Jin-Hua & Fan, Ying & Yu, Song-Min, 2014. "Energy conservation and CO2 emission reduction in China's 11th Five-Year Plan: A performance evaluation," Energy Economics, Elsevier, vol. 46(C), pages 348-359.
    7. Wang, Ce & Liao, Hua & Pan, Su-Yan & Zhao, Lu-Tao & Wei, Yi-Ming, 2014. "The fluctuations of China’s energy intensity: Biased technical change," Applied Energy, Elsevier, vol. 135(C), pages 407-414.
    8. Kahrl, Fredrich & Roland-Holst, David & Zilberman, David, 2013. "Past as Prologue? Understanding energy use in post-2002 China," Energy Economics, Elsevier, vol. 36(C), pages 759-771.
    9. Zhang, Ming & Wang, Wenwen, 2011. "Analysis of China's energy utilization for 2007," Energy Policy, Elsevier, vol. 39(3), pages 1612-1616, March.
    10. Petrick, Sebastian, 2013. "Carbon efficiency, technology, and the role of innovation patterns: Evidence from German plant-level microdata," Kiel Working Papers 1833, Kiel Institute for the World Economy (IfW Kiel).
    11. Cao, Jing & Karplus, Valerie J., 2014. "Firm-level determinants of energy and carbon intensity in China," Energy Policy, Elsevier, vol. 75(C), pages 167-178.

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