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Effects of deregulation and vertical unbundling on the performance of China's electricity generation sector

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  • Hang GAO
  • Jo VAN BIESEBROECK

Abstract

We study whether the 2002 deregulation and vertical unbundling of the Chinese electricity sector has boosted productivity in the generation segment of the industry. Controlling explicitly for sources of price-heterogeneity across firms and for firm-fixed effects, we find deregulation to be associated with a reduction in labor input and material use of 6 and 4 percent, respectively. This effect only appears two years after the reforms, is robust to alternative ways of identifying restructured firms, and to the nonrandom selection of restructured firms using a matching estimator. Input use of new state-owned firms that start operations two years into the reform period does not differ significantly anymore from input use of private sector entrants.

Suggested Citation

  • Hang GAO & Jo VAN BIESEBROECK, 2011. "Effects of deregulation and vertical unbundling on the performance of China's electricity generation sector," Working Papers of Department of Economics, Leuven ces11.30, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces11.30
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    2. Pollitt, Michael G., 2012. "The role of policy in energy transitions: Lessons from the energy liberalisation era," Energy Policy, Elsevier, vol. 50(C), pages 128-137.
    3. Du, Limin & Mao, Jie, 2015. "Estimating the environmental efficiency and marginal CO2 abatement cost of coal-fired power plants in China," Energy Policy, Elsevier, vol. 85(C), pages 347-356.
    4. He, Ming & Chen, Yang & van Marrewijk, Charles, 2021. "The effects of urban transformation on productivity spillovers in China," Economic Modelling, Elsevier, vol. 95(C), pages 473-488.
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    7. Zhang, Ning & Jiang, Xue-Feng, 2019. "The effect of environmental policy on Chinese firm's green productivity and shadow price: A metafrontier input distance function approach," Technological Forecasting and Social Change, Elsevier, vol. 144(C), pages 129-136.
    8. Philipp Steinbrunner, 2023. "I want a quiet life! On productivity and competition in the Central European energy sector," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 403-428, April.
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    10. Wang, Chang & Guo, Yue & Yang, Yu & Chen, Shiyi, 2022. "The environmental benefits of electricity industry restructuring in China: Ownership mixing vs. vertical unbundling," Energy Economics, Elsevier, vol. 115(C).
    11. Du, Limin & Hanley, Aoife & Rehdanz, Katrin, 2014. "China's CO₂ emissions from power generating stations: A first exploration," Kiel Working Papers 1934, Kiel Institute for the World Economy.
    12. Triebs, Thomas P. & Pollitt, Michael G., 2019. "Objectives and incentives: Evidence from the privatization of Great Britain’s power plants," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 1-29.
    13. Kuang, Yunming & Lin, Boqiang, 2021. "Performance of tiered pricing policy for residential natural gas in China: Does the income effect matter?," Applied Energy, Elsevier, vol. 304(C).
    14. Ma, Chunbo & Zhao, Xiaoli, 2015. "China's electricity market restructuring and technology mandates: Plant-level evidence for changing operational efficiency," Energy Economics, Elsevier, vol. 47(C), pages 227-237.
    15. Sun, Chuanwang, 2015. "An empirical case study about the reform of tiered pricing for household electricity in China," Applied Energy, Elsevier, vol. 160(C), pages 383-389.
    16. Richter, Philipp M. & Schiersch, Alexander, 2017. "CO2 emission intensity and exporting: Evidence from firm-level data," European Economic Review, Elsevier, vol. 98(C), pages 373-391.
    17. Stefan Seifert, 2015. "Measuring Productivity When Technologies Are Heterogeneous: A Semi-Parametric Approach for Electricity Generation," Discussion Papers of DIW Berlin 1526, DIW Berlin, German Institute for Economic Research.
    18. Pablo David Necoechea-Porras & Asunción López & Juan Carlos Salazar-Elena, 2021. "Deregulation in the Energy Sector and Its Economic Effects on the Power Sector: A Literature Review," Sustainability, MDPI, vol. 13(6), pages 1-23, March.
    19. Du, Limin & He, Yanan & Yan, Jianye, 2013. "The effects of electricity reforms on productivity and efficiency of China's fossil-fired power plants: An empirical analysis," Energy Economics, Elsevier, vol. 40(C), pages 804-812.
    20. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2014. "Challenges of working with the Chinese NBS firm-level data," China Economic Review, Elsevier, vol. 30(C), pages 339-352.
    21. Lin, Boqiang & Du, Kerui, 2015. "Energy and CO2 emissions performance in China's regional economies: Do market-oriented reforms matter?," Energy Policy, Elsevier, vol. 78(C), pages 113-124.
    22. Carlo Cambini & Federico Caviggioli & Giuseppe Scellato, 2015. "R&D, Patenting and Market Regulation: Evidence from EU Electricity industry," IEFE Working Papers 78, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    23. Germeshausen, Robert, 2018. "The European Union emissions trading scheme and fuel efficiency of fossil fuel power plants in Germany," ZEW Discussion Papers 18-007, ZEW - Leibniz Centre for European Economic Research.
    24. Eisenberg, Tom, 2024. "Missing data and the effects of market deregulation: Evidence from Chinese coal power," International Journal of Industrial Organization, Elsevier, vol. 93(C).

    More about this item

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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