Do Fossil-Fuel Price Distortions Impact the Low-Carbon Transition in China’s Energy Intensive Industries?

Energy intensive industries (EIIs) in China are predominantly reliant on fossil fuels. Consequently, such high fossil fuel dependency has amplified carbon emission levels and blocked the low-carbon transition. It is inappropriate to discuss the solution of the dependency before investigating fossil-fuel price distortion and its impact on the industrial energy consumption. Therefore, this paper built a dynamic trans-log cost function model based on provincial panel data of China’s Ells between 2004 and 2016, to investigate inter-fuel substitution effects caused by own price elasticities and cross price elasticities, and analyzed the impact of fossil-fuel price distortions on low-carbon transition. The level of price distortions in coal, gasoline and diesel was evaluated, based on which the CO2 mitigation potentials in China’s EIIs were estimated. Results show that: 1) in each EII sector, the own price elasticities of all fuels were negative while the cross price elasticities among coal, oil and electricity were positive, suggesting substitution effect exists; 2) the average level of price distortions in coal, gasoline and diesel is 7.48, 11.1 and 32.19%, respectively, which means the prices of coal tend to be more market- oriented than the other two fuels; 3) removing coal price distortions can potentially reduce CO2 emissions in China’s EIIs by 905.78 million tons, while the effects of removing oil price distortions were uncertain, unless the substitution of coal for oil was restrained. Therefore, there is still much room for improvement in China’s fossil-fuel market reform. Possible policies are required to improve the production in EIIs and the low-carbon transition by adopting cleaner energy resources to substitute fossil-fuels.

Impact of Energy Price Distortion on Green TFP Based on Spatial Econometric Model

With environmental regulation as the intermediary, this paper studies the influence mechanism and mediating effect of energy price distortion on green total factor productivity. On the basis of the panel data of 30 provinces in China (except Tibet, Hong Kong, Macao, and Taiwan), the research results from the study of panel and spatial metrology show that energy price distortion has a significant negative effect on the improvement of green total factor productivity. Different environmental regulation tools have different impacts, and the impact effect of fiscal energy conservation and environmental protection expenditure is better than that of pollution punishment. The transmission effect of energy price on environmental regulation policies is different when environmental regulation is the intermediary. The increase of the degree of energy price distortion will increase the financial expenditure of energy conservation and environmental protection, while the energy factor price will increase the green total factor productivity with the increase of pollution punishment.

The Influence of Energy Price Distortion on Region Energy Efficiency in China’s Energy-Intensive Industries from the Perspectives of Urban Heterogeneity

As typical representatives of China’s industrial sectors, energy intensive industries are the focus of energy conservation. This study constructs a trans-log production function and stochastic frontier analysis model to analyze the impact of energy price distortion on total factor energy efficiency in energy intensive industries on the city level. The results reveal that the phenomenon of energy price distortion existed in all cities from 2003 to 2019, with an average degree of −0.175; and the total factor energy efficiency in China’s energy intensive sectors showed an upward trend, with an average efficiency of 0.729. Further deep analysis of affecting mechanisms concluded that the price distortion showed a significant restraining effect on improving energy efficiency, while the improvement of urban agglomeration systems had an opposite effect. In addition, energy consumption structure, foreign trade, and infrastructure construction are positively correlated with energy efficiency. Therefore, promoting the market-oriented reform of China’s energy market is of great significance to improve city energy efficiency and build a resource-conserving society.

Sharing Manufacturer’s Demand Information in a Supply Chain with Price and Service Effort Competition

Problem definition: This paper investigates the issue of sharing the private demand information of a manufacturer that sells a product to retailers competing on prices and service efforts. Academic/practical relevance: In the existing literature, which ignores service effort competition, it is known that demand signaling induces an informed manufacturer to distort the wholesale price downward, which benefits the retailers, and so, they do not have any incentive to receive the manufacturer’s private information. In practice, many manufacturers share demand information with their retailers that compete on prices and service efforts (e.g., demand-enhancing retail activities), a setting that has not received much attention from the literature. Methodology: We develop a game-theoretic model with one manufacturer selling to two competing retailers and solve for the equilibrium of the game. Results: We show how an informed manufacturer may distort the wholesale price upward or downward to signal demand information to the retailers, depending on the cost of service effort, the intensity of effort competition, and the number of uninformed retailers. We fully characterize the impact of such wholesale price distortion on the firms’ incentive to share information and derive the conditions under which the manufacturer shares information with none, one, or both of the retailers. We derive conditions under which a higher cost of service effort makes the retailers or the manufacturer better off. Managerial implications: Our results provide novel insights about how service effort competition impacts the incentives for firms in a supply chain to share a manufacturer’s private demand information. For instance, when the cost of effort is high or service effort competition is intense, a manufacturer should share information with none or some, but not all, of the retailers.

Market Distortion, Inter-Provincial Factor Misallocation, and Total Factor Productivity

As an emerging economy, market distortions exist in China’s institutional adjustment during its economy transformation. However, the price distortion of capital and labor factors will lead to factor misallocation among provinces. This will eventually reduce the total factor productivity (TFP) at the national level. Based on Hsieh and Klenow’s [1] model framework, this paper aims to measure the degree of misallocation of capital and labor factors among provinces, and estimates the growth potential of China’s TFP by using input-output data from 1993 to 2017. The findings show that: First, the degree of inter-provincial labor misallocation is greater than that of capital. For example, in 2017, the degree of capital (labor) misallocation was 5.77% (10.25%), resulting in China’s TFP loss of 17.23%. Second, due to the factor marketization reforms, the degree of labor misallocation has declined while the degree of capital misallocation has intensified in recent years. Lastly, this paper introduces the time-varying elasticity production function model, finding that using the Cobb-Douglas production function will cause the factor misallocation to be underestimated by 5.91% due to the assumption of constant output elasticity.

Labor Industry Allocation, Industrial Structure Optimization, and Economic Growth

Industrial structure optimization is an important explanatory variable of economic growth. The allocation of production factors among industries affects the evolution of industrial structure and then acts on economic growth. Labor force is one of the most important factors of production. In recent years, there has been a significant wage difference between different industries in China’s labor market, and the employees have shifted from low-wage industries to high-wage industries. Using the sample data of 282 prefecture-level cities from 2008 to 2018, this paper tests whether this wage-guided labor industry allocation will affect economic growth and whether there is an intermediary effect of industrial structure optimization. The empirical results show that the allocation of labor force to high-wage industries not only directly hinders economic growth but also indirectly hinders economic growth through the intermediary effect of industrial structure optimization. Furthermore, this paper makes a comparative study in different regions. The research conclusion shows that promoting the optimization of industrial structure and economic growth depends on correcting the price distortion of labor market and guiding the cross-industry rational allocation of labor force.

STORE PROMOTION, MANUFACTURER COMPETITION AND WELFARE

This study evaluates the partial exclusion effects of store promotion. We find that a manufacturer with a better brand name has a higher willingness-to-pay for promotion services offered by retail stores or online platforms. The promotion results in higher sales-weighted average prices (wholesale and retail) and a larger inter-brand price gap. The stores or platforms extract more profits from manufacturers and consumers through the promotion services. The effects on consumer surplus and social welfare depend on whether the promotion alters consumer preferences. If it does, more consumers would be choosing their less-preferred brands because of the larger inter-brand price gap, which would be socially inefficient. If it does not, the promotion may help to correct the price distortion, but the social welfare effect is positive only when the promotion effect is small enough. In both cases, the promotion services reduce the total consumer surplus by softening inter-brand competition.