Incorporating Foreign Direct Investment and Trade into Energy-Employment Nexus: Evidence from China

Chung-Khain Wye

Chinese Economy, 2018, vol. 51, issue 1, 69-96

Abstract: Energy consumption in China has been rapidly increasing due to production and consumption, and the growth varies by regions. Chinese government has been trying to reduce energy intensity in production and energy use among households through several energy efficiency policies since 1980s. However, there has been concern over the employment impact of the change of production and consumption structure. Previous studies on the energy-employment nexus focused primarily on the energy-to-employment link, neglecting the possibility of the reverse. In addition, these studies investigated the direct link between the two, ignoring the channel through which one could affect another. This article seeks to fill up the gap by incorporating FDI and trade into the energy-employment nexus using panel cointegration and Granger causality methods. The major findings suggest that energy efficiency policy can be implemented in FDI-led and trade-led provinces located in the China’s coast without impeding the employment growth. However, performance of trade and FDI should be further enhanced in China’s hinterland to promote employment growth and energy efficiency. This study highlights the importance of devising energy policy and labor market policy alongside trade liberalization and foreign investment policies in China.

Date: 2018
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DOI: 10.1080/10971475.2017.1368892

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