The impact of differential power pricing policy on firm productivity in China: Evidence from iron and steel firms

Jianying Qu, Ke Li, Ze Ye and Shuai Shao

Journal of Asian Economics, 2022, vol. 80, issue C

Abstract: The differential power pricing (DPP) policy is implemented as an important measure to curb the unrestrained development of high-energy-consuming industries, optimize industrial structure, and promote the upgrading of industrial technology. However, it is unclear how the DPP policy affects the productivity of regulated firms. Using the difference-in-differences approach, this study is the first to investigate empirically the DPP policy’s impact on the productivity of China’s iron and steel firms—a top carbon emitter. The results show that the DPP policy has a significant negative effect on the productivity of iron and steel firms, leading to a 1.20% per annum decrease in the total factor productivity growth of these firms, primarily because the policy significantly hinders firms’ scale efficiency. Considering the heterogeneity of firms, the impeding impact on large-scale and state-owned firms is less than that on the firms of full sample. To curb the irrational expansion of energy-intensive industries and eliminate backward production capacity, the government should implement the DPP policy more precisely according to the heterogeneity of firms, and other auxiliary measures, such as cost compensation for innovation, are also recommended.

Keywords: Differential power pricing policy; Total factor productivity; Iron and steel industry; Difference-in-differences; China (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:80:y:2022:i:c:s1049007822000379

DOI: 10.1016/j.asieco.2022.101478

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