Regulating Conglomerates: Evidence from an Energy Conservation Program in China

Qiaoyi Chen, Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato and Daniel Yi Xu

American Economic Review, 2025, vol. 115, issue 2, 408-47

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 some production to unregulated firms within their conglomerate instead of improving their energy efficiency. To account for conglomerate and market spillovers, we interpret these results through the lens of an industry equilibrium model featuring conglomerate production. The policy raises welfare if the per ton benefits of carbon reduction exceed $161. Alternative policies that exploit public information on business networks can increase aggregate energy savings by 10 percent.

JEL-codes: D22 L22 L51 L60 P28 P31 Q48 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aer.20211455

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