The effects of Mandatory Energy Efficiency Policy on resource allocation efficiency: Evidence from Chinese industrial sector

The extensive theoretical literature emphasizes that the improvement of resource allocation efficiency plays a critical role in the economic efficiency effect of energy and environmental policies. However, few empirical studies focus on the assessment of this effect of energy policies on resource allocation efficiency. Thus, this article treats the implementation of China's Mandatory Energy Efficiency Policy (MEEP) during the 11th Five-Year Plan, as a quasi-natural experiment to testify the impact of MEEP on resource allocation efficiency of industries. To this end, an annual data panel including a total of 2,382,263 observations from 625,478 micro enterprises at the city sub-sector level is constructed for 280 cities from 1998 to 2008. The Difference-in-Difference (DID) model and the DDD model are adopted to estimate the effect of MEEP on the resource allocation efficiency of industries in China and its heterogeneity across sub-industries, respectively. The results show that China's MEEP enforced during the 11th Five-Year Plan indeed contributes significantly to the efficiency improvement of resource allocation in the industrial sector. The conclusion is still robust by replacing the different indicators or changing time intervals. Further, this effect for the high-energy-consuming or high polluting industries is significantly lower than that in others. It may be attributed to the differences in the response rates to MEEP caused by the ownerships among firms and industries. (c) 2021 Economic Society of Australia, Queensland. Published by Elsevier B.V. All rights reserved.

Automated summary

This study examines the impact of energy policies on resource allocation efficiency in the industrial sector using the implementation of China's Mandatory Energy Efficiency Policy as a case study. The results show that the energy policy has significantly contributed to the improvement of resource allocation efficiency, although its effect is lower in high-energy-consuming and high-polluting industries.