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Regulating Conglomerates in China: Evidence from an Energy Conservation Program

Author

Listed:
  • Qiaoyi Chen
  • Zhao Chen
  • Zhikuo Liu
  • Juan Carlos Suárez Serrato
  • Daniel Xu

Abstract

We study a prominent energy regulation affecting large Chinese manufacturers that are part of broader conglomerates. Using detailed firm-level data and difference-in-differences research designs, we show that regulated firms cut output and shifted production to unregulated firms in the same conglomerate instead of improving their energy efficiency. Conglomerate spillovers account for 40% of the output loss of regulated firms and substantially reduce aggregate energy savings. Using a structural model, we show that alternative polices that use public information on business networks could lower the shadow cost of the regulation by more than 40% and increase aggregate energy savings by 10%.

Suggested Citation

  • 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.
    • Handle: RePEc:nbr:nberwo:29066
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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