Does the local electricity price affect labor demand? Evidence from China’s industrial enterprises

Jiaman Li (), Qinzhe Jiang (), Kangyin Dong () and Xiucheng Dong ()
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Jiaman Li: University of International Business and Economics, School of International Trade and Economics
Qinzhe Jiang: University of International Business and Economics, School of International Trade and Economics
Xiucheng Dong: University of International Business and Economics, School of International Trade and Economics

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2025, vol. 27, issue 12, No 4, 28513-28537

Abstract: Abstract With increasing global concerns about the environment, the crucial question of how to balance employment and environmental protection has become one of the central issues facing China. This study aims to investigate whether adjustments in the electricity price affect labor demand in manufacturing enterprises by employing a broad sample of 39 industries, 280 cities, and 224,307 enterprises in China during 2006–2013. Furthermore, considering the significant differences across regions, industries types, and ownership types of enterprises, this study divides the whole sample into several subsamples. Besides, the internal mediation impact mechanism (i.e., including the cost effect and demand effect) of the influences of electricity prices on labor demand is further checked. Accordingly, the empirical results reveal that: (1) The rising electricity price will reduce labor demand in manufacturing enterprises; (2) this impact is heterogeneous in regions with different economic development levels, industries with different labor-to-capital ratios, and enterprises with different ownership types, specifically, this influence is greater in high-GDP cities, labor-intensive industries, and in enterprises with foreign private ownership; and (3) the electricity price can indirectly affect employment through negative cost effect and positive demand effect. This study facilitates new evidence for local government to formulate specific policies to adjust electricity prices and employment structure.

Keywords: Electricity price; Labor demand; China’s manufacturing enterprises; Heterogeneity; Mediation impact mechanism (search for similar items in EconPapers)
JEL-codes: J23 L6 Q48 Q52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10668-022-02256-z

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