IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v322y2025ics0360544225011764.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544225011764
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2025.135534?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Sun, Huaping & Edziah, Bless Kofi & Kporsu, Anthony Kwaku & Sarkodie, Samuel Asumadu & Taghizadeh-Hesary, Farhad, 2021. "Energy efficiency: The role of technological innovation and knowledge spillover," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    2. Xu, Fei & Li, Qiangyi & Yang, Mian, 2022. "The impacts of high-speed rail on the transformation of resource-based cities in China: A market segmentation perspective," Resources Policy, Elsevier, vol. 78(C).
    3. Panle Jia Barwick & Shengmao Cao & Shanjun Li, 2021. "Local Protectionism, Market Structure, and Social Welfare: China's Automobile Market," American Economic Journal: Economic Policy, American Economic Association, vol. 13(4), pages 112-151, November.
    4. Dave Donaldson, 2018. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," American Economic Review, American Economic Association, vol. 108(4-5), pages 899-934, April.
    5. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    6. Robinson, Amanda Lea, 2016. "Internal Borders: Ethnic-Based Market Segmentation in Malawi," World Development, Elsevier, vol. 87(C), pages 371-384.
    7. Philippe Aghion & Ufuk Akcigit & Antonin Bergeaud & Richard Blundell & David Hemous, 2019. "Innovation and Top Income Inequality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(1), pages 1-45.
    8. A. Kerem Cosar & Paul L. E. Grieco & Felix Tintelnot, 2015. "Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 623-637, July.
    9. Song, Feng & Bi, De & Wei, Chu, 2019. "Market segmentation and wind curtailment: An empirical analysis," Energy Policy, Elsevier, vol. 132(C), pages 831-838.
    10. Yang, Mian & Yang, Fuxia & Sun, Chuanwang, 2018. "Factor market distortion correction, resource reallocation and potential productivity gains: An empirical study on China's heavy industry sector," Energy Economics, Elsevier, vol. 69(C), pages 270-279.
    11. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    12. Ouyang, Xiaoling & Sun, Chuanwang, 2015. "Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency," Energy Economics, Elsevier, vol. 48(C), pages 117-126.
    13. Zhao, Da & Yu, Ao & Guo, Jingyuan, 2022. "Judicial institutions, local protection and market segmentation: Evidence from the establishment of interprovincial circuit tribunals in China," China Economic Review, Elsevier, vol. 75(C).
    14. Chen, Maozhi & Sinha, Avik & Hu, Kexiang & Shah, Muhammad Ibrahim, 2021. "Impact of technological innovation on energy efficiency in industry 4.0 era: Moderation of shadow economy in sustainable development," Technological Forecasting and Social Change, Elsevier, vol. 164(C).
    15. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.
    16. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    17. Pan, Xiongfeng & Guo, Shucen & Han, Cuicui & Wang, Mengyang & Song, Jinbo & Liao, Xianchun, 2020. "Influence of FDI quality on energy efficiency in China based on seemingly unrelated regression method," Energy, Elsevier, vol. 192(C).
    18. Haoqi Qian & Shaodan Xu & Jing Cao & Feizhou Ren & Wendong Wei & Jing Meng & Libo Wu, 2021. "Air pollution reduction and climate co-benefits in China’s industries," Nature Sustainability, Nature, vol. 4(5), pages 417-425, May.
    19. Soto, Gonzalo Hernández, 2024. "The role of outward foreign direct investment as a filter for high energy intensity economies in the European Union," Applied Energy, Elsevier, vol. 361(C).
    20. Shahzad, Umer & Doğan, Buhari & Sinha, Avik & Fareed, Zeeshan, 2021. "Does Export product diversification help to reduce energy demand: Exploring the contextual evidences from the newly industrialized countries," Energy, Elsevier, vol. 214(C).
    21. Eric Maskin & Yingyi Qian & Chenggang Xu, 2000. "Incentives, Information, and Organizational Form," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 359-378.
    22. He, Weimin & Wang, Bin, 2024. "Environmental jurisdiction and energy efficiency: Evidence from China's establishment of environmental courts," Energy Economics, Elsevier, vol. 131(C).
    23. Qin, Quande & Li, Xin & Li, Li & Zhen, Wei & Wei, Yi-Ming, 2017. "Air emissions perspective on energy efficiency: An empirical analysis of China’s coastal areas," Applied Energy, Elsevier, vol. 185(P1), pages 604-614.
    24. Mu, Qing & Lee, Keun, 2005. "Knowledge diffusion, market segmentation and technological catch-up: The case of the telecommunication industry in China," Research Policy, Elsevier, vol. 34(6), pages 759-783, August.
    25. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    26. Qiaoyi Chen & Zhao Chen & Zhikuo Liu & Juan Carlos Suárez Serrato & Daniel Xu, 2021. "Regulating Conglomerates in China: Evidence from an Energy Conservation Program," NBER Working Papers 29066, National Bureau of Economic Research, Inc.
    27. Hu, Jin-Li & Wang, Shih-Chuan, 2006. "Total-factor energy efficiency of regions in China," Energy Policy, Elsevier, vol. 34(17), pages 3206-3217, November.
    28. Li, Jianglong & Lin, Boqiang, 2017. "Does energy and CO2 emissions performance of China benefit from regional integration?," Energy Policy, Elsevier, vol. 101(C), pages 366-378.
    29. Liang Nie and ZhongXiang Zhang, 2022. "Market Segmentation and Energy Efficiency: Evidence from China's Regional Economies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    30. Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004. "Local protectionism and regional specialization: evidence from China's industries," Journal of International Economics, Elsevier, vol. 63(2), pages 397-417, July.
    31. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1091-1135.
    32. Haoqi Qian & Shaodan Xu & Jing Cao & Feizhou Ren & Wendong Wei & Jing Meng & Libo Wu, 2021. "Author Correction: Air pollution reduction and climate co-benefits in China’s industries," Nature Sustainability, Nature, vol. 4(2), pages 188-188, February.
    33. Elberg, Andrés, 2016. "Sticky prices and deviations from the Law of One Price: Evidence from Mexican micro-price data," Journal of International Economics, Elsevier, vol. 98(C), pages 191-203.
    34. Eva Lyubich & Joseph S. Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," Working Papers 18-03, Center for Economic Studies, U.S. Census Bureau.
    35. Jan De Loecker & Pinelopi Koujianou Goldberg, 2014. "Firm Performance in a Global Market," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 201-227, August.
    36. Zhang, Caiqing & Chen, Panyu, 2022. "Applying the three-stage SBM-DEA model to evaluate energy efficiency and impact factors in RCEP countries," Energy, Elsevier, vol. 241(C).
    37. Curtis, E. Mark & Lee, Jonathan M., 2019. "When do environmental regulations backfire? Onsite industrial electricity generation, energy efficiency and policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 174-194.
    38. Ding, Chengri & Niu, Yi, 2019. "Market size, competition, and firm productivity for manufacturing in China," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 81-98.
    39. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September.
    40. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(4), pages 1211-1236.
    41. Adriana Peluffo, 2013. "Regional integration and technology diffusion: The case of Uruguay," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(5), pages 786-816, August.
    42. Daniel L. Bennett, 2021. "Local economic freedom and creative destruction in America," Small Business Economics, Springer, vol. 56(1), pages 333-353, January.
    43. Chang, Chun-Ping & Wen, Jun & Zheng, Mingbo & Dong, Minyi & Hao, Yu, 2018. "Is higher government efficiency conducive to improving energy use efficiency? Evidence from OECD countries," Economic Modelling, Elsevier, vol. 72(C), pages 65-77.
    44. Zhang, Ning & Kong, Fanbin & Choi, Yongrok & Zhou, P., 2014. "The effect of size-control policy on unified energy and carbon efficiency for Chinese fossil fuel power plants," Energy Policy, Elsevier, vol. 70(C), pages 193-200.
    45. Sandra Poncet, 2005. "A Fragmented China: Measure and Determinants of Chinese Domestic Market Disintegration," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 409-430, August.
    46. Dave Donaldson, 2015. "The Gains from Market Integration," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 619-647, August.
    47. Fan, Meiting & Li, Mengxu & Liu, Jianghua & Shao, Shuai, 2022. "Is high natural resource dependence doomed to low carbon emission efficiency? Evidence from 283 cities in China," Energy Economics, Elsevier, vol. 115(C).
    48. Gene M. Grossman & Elhanan Helpman, 2015. "Globalization and Growth," American Economic Review, American Economic Association, vol. 105(5), pages 100-104, May.
    49. Jing, Bing, 2007. "Network externalities and market segmentation in a monopoly," Economics Letters, Elsevier, vol. 95(1), pages 7-13, April.
    50. Xu, Mengmeng & Tan, Ruipeng, 2021. "Removing energy allocation distortion to increase economic output and energy efficiency in China," Energy Policy, Elsevier, vol. 150(C).
    51. Wurlod, Jules-Daniel & Noailly, Joëlle, 2018. "The impact of green innovation on energy intensity: An empirical analysis for 14 industrial sectors in OECD countries," Energy Economics, Elsevier, vol. 71(C), pages 47-61.
    52. Alwyn Young, 2000. "The Razor's Edge: Distortions and Incremental Reform in the People's Republic of China," NBER Working Papers 7828, National Bureau of Economic Research, Inc.
    53. Lin, Boqiang & Wang, Miao, 2021. "What drives energy intensity fall in China? Evidence from a meta-frontier approach," Applied Energy, Elsevier, vol. 281(C).
    54. Chen, Dengke & Chen, Shiyi & Jin, Hao & Lu, Yulin, 2020. "The impact of energy regulation on energy intensity and energy structure: Firm-level evidence from China," China Economic Review, Elsevier, vol. 59(C).
    55. Zhou, P. & Ang, B.W. & Wang, H., 2012. "Energy and CO2 emission performance in electricity generation: A non-radial directional distance function approach," European Journal of Operational Research, Elsevier, vol. 221(3), pages 625-635.
    56. Huang, Ruting & Yao, Xin, 2024. "City size and energy efficiency of Chinese manufacturing firms: An empirical study from a city characteristic perspective," Energy Economics, Elsevier, vol. 129(C).
    57. Perkins, Dwight Heald, 1988. "Reforming China's Economic System," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 601-645, June.
    58. Elliott, Robert J.R. & Sun, Puyang & Zhu, Tong, 2017. "The direct and indirect effect of urbanization on energy intensity: A province-level study for China," Energy, Elsevier, vol. 123(C), pages 677-692.
    59. Bylund, Per L. & McCaffrey, Matthew, 2017. "A theory of entrepreneurship and institutional uncertainty," Journal of Business Venturing, Elsevier, vol. 32(5), pages 461-475.
    60. Li, Yunhe & Tina Zhang, Xiaotian, 2023. "Rent-seeking in bank credit and firm R&D innovation: The role of industrial agglomeration," Journal of Business Research, Elsevier, vol. 159(C).
    61. Luan, Bingjiang & Zou, Hong & Chen, Shuxing & Huang, Junbing, 2021. "The effect of industrial structure adjustment on China’s energy intensity: Evidence from linear and nonlinear analysis," Energy, Elsevier, vol. 218(C).
    62. Eva Lyubich & Joseph Shapiro & Reed Walker, 2018. "Regulating Mismeasured Pollution: Implications of Firm Heterogeneity for Environmental Policy," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 136-142, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Jianglong & Lin, Boqiang, 2017. "Does energy and CO2 emissions performance of China benefit from regional integration?," Energy Policy, Elsevier, vol. 101(C), pages 366-378.
    2. Zheng, Yilin & Lu, Ming & Li, Jiewei, 2022. "Internal circulation in China: Analyzing market segmentation and integration using big data for truck traffic flow," Economic Modelling, Elsevier, vol. 115(C).
    3. Huang, Ruting & Yao, Xin, 2024. "City size and energy efficiency of Chinese manufacturing firms: An empirical study from a city characteristic perspective," Energy Economics, Elsevier, vol. 129(C).
    4. Xu, Hao & Xu, Jingxuan & Wang, Jie & Hou, Xiang, 2023. "Reduce production or increase efficiency? Hazardous air pollutants regulation, energy use, and the synergistic effect on industrial enterprises' carbon emission," Energy Economics, Elsevier, vol. 126(C).
    5. Qin, Quande & Yu, Ying & Liu, Yuan & Zhou, Jianqing & Chen, Xiude, 2023. "Industrial agglomeration and energy efficiency: A new perspective from market integration," Energy Policy, Elsevier, vol. 183(C).
    6. Bo, Shiyu, 2020. "Centralization and regional development: Evidence from a political hierarchy reform to create cities in china," Journal of Urban Economics, Elsevier, vol. 115(C).
    7. Hu, Xun & Xue, Cheng & Zhao, Xiangfang, 2025. "Corporate bond defaults and cross-regional investment: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 85(C), pages 1514-1533.
    8. TANG, Wei & WANG, Yuan & WU, Jiameng, 2025. "Local favoritism in China's public procurement: Information frictions or incentive distortion?," Journal of Urban Economics, Elsevier, vol. 145(C).
    9. Guo, Hao & Minier, Jenny, 2021. "Borders, geography, and economic activity: The case of China," Regional Science and Urban Economics, Elsevier, vol. 90(C).
    10. Ding, Chengri & Niu, Yi, 2019. "Market size, competition, and firm productivity for manufacturing in China," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 81-98.
    11. Markus Eberhardt & Zheng Wang & Zhihong Yu, 2013. "Intra-National Protectionism in China: Evidence from the Public Disclosure of ‘Illegal’ Drug Advertising," Discussion Papers 2013-04, University of Nottingham, GEP.
    12. Xinyu Hou & Puyang Sun, 2023. "The impact of dismantling state monopoly on market integration: Evidence from the edible salt reform in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(3), pages 589-609, July.
    13. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    14. Xin Fan & Shan Jin & Zeyu Chen, 2023. "Who Benefits from Domestic Market Integration?," Journal of Happiness Studies, Springer, vol. 24(6), pages 2083-2109, August.
    15. Du, Zhili & Hao, Peng, 2025. "Firm clustering, agglomeration externalities and energy efficiency: Evidence from chinese industrial enterprises," Energy Economics, Elsevier, vol. 145(C).
    16. Xiaolin Yu & Kai Wan, 2025. "Can removing regional barriers reduce carbon emissions in border regions? Quasi-natural experiments from China," Economic Change and Restructuring, Springer, vol. 58(2), pages 1-29, April.
    17. Shao, Jun & Wang, Lianghu, 2023. "Can new-type urbanization improve the green total factor energy efficiency? Evidence from China," Energy, Elsevier, vol. 262(PB).
    18. Jin, Gang & Yu, Binbin & Shen, Kunrong, 2021. "Domestic trade and energy productivity in China: An inverted U-shaped relationship," Energy Economics, Elsevier, vol. 97(C).
    19. Jin, Gang & Shen, Kunrong & Li, Jian, 2020. "Interjurisdiction political competition and green total factor productivity in China: An inverted-U relationship," China Economic Review, Elsevier, vol. 61(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:322:y:2025:i:c:s0360544225011764. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.