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Market segmentation and the dilemma of energy efficiency improvement: New insights from Chinese manufacturing firms

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  • Huang, Ruting
  • Miao, Qin
  • Liu, Chen
  • Li, Zhi

Abstract

Cities are crucial administrative units in China, central to achieving economic development and dual carbon goals. However, inter-city market segmentation may hinder sustainable development and its impact on energy efficiency has been a critical topic but received insufficient attention at the micro-level. This paper addresses this gap by empirically examining the relationship using firm-level data from 2001 to 2012. We measure the inter-city market segmentation index using the consumer price index classification method and calculate corporate energy efficiency using data from China Environmental Statistics Database and China Industrial Enterprise Databases. Our empirical results indicate that inter-city market segmentation significantly reduces corporate energy efficiency. Firm-level heterogeneity analysis reveals that this inhibitory effect is more pronounced for state-owned and foreign enterprises, labor-intensive firms. Additionally, firms in economically lagging regions and regions with high fiscal incentives are more impacted. Mechanism analysis shows that market segmentation affects corporate energy efficiency mainly by hindering technological progress and reducing regional industry competition. These findings provide insights for policy-making regarding market integration and energy efficiency improvement.

Suggested Citation

  • Huang, Ruting & Miao, Qin & Liu, Chen & Li, Zhi, 2025. "Market segmentation and the dilemma of energy efficiency improvement: New insights from Chinese manufacturing firms," Energy, Elsevier, vol. 322(C).
    • Handle: RePEc:eee:energy:v:322:y:2025:i:c:s0360544225011764
    DOI: 10.1016/j.energy.2025.135534
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