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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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    7. Ma, Chunbo, 2014. "A multi-fuel, multi-sector and multi-region approach to index decomposition: An application to China's energy consumption 1995–2010," Energy Economics, Elsevier, vol. 42(C), pages 9-16.
    8. 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).
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    10. 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.

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