Sectoral changes, energy consumption, and the role of foreign firm ownership‎ : the case of Chinese cities

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This paper decomposes the changes in energy consumption for the industrial sector among a set of 327 Chinese cities over the years 1998 to 2013, taking into that energy consumption can be generally reduced via the scale, the technique and the composition effect. In a second step, it estimates the impact of foreign firm ownership on the industrial shift across sectors, thus, on the composition effect. My findings indicate that both the technique and the composition effect contributed on average to a decline in energy intensity, with the technique effect playing the dominant role. A higher share in foreign firm ownership appears to shift the economy towards relatively more energy intensive sectors, however, only the share of fully foreign owned enterprises from non-ethnically Chinese origins remains statistical significant across different specifications. When considering the changes in the foreign ownership structure instead of the initial values, findings at first suggest a contribution towards relatively cleaner industries. However, they are not stable across different definitions of "foreign ownership". Further research is necessary to resolve potential endogeneity concerns.