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Regulating Conglomerates: Evidence from an Energy Conservation Program in China

Author

Listed:
  • Qiaoyi Chen
  • Zhao Chen
  • Zhikuo Liu
  • Juan Carlos Suárez Serrato
  • Daniel Yi Xu

Abstract

We study a prominent energy regulation affecting large Chinese manufacturers that are part of broader conglomerates. Using detailed firm-level data and difference-in-differences research designs, we show that regulated firms cut output and shifted some production to unregulated firms within their conglomerate instead of improving their energy efficiency. To account for conglomerate and market spillovers, we interpret these results through the lens of an industry equilibrium model featuring conglomerate production. The policy raises welfare if the per ton benefits of carbon reduction exceed $161. Alternative policies that exploit public information on business networks can increase aggregate energy savings by 10 percent.

Suggested Citation

  • Qiaoyi Chen & Zhao Chen & Zhikuo Liu & Juan Carlos Suárez Serrato & Daniel Yi Xu, 2025. "Regulating Conglomerates: Evidence from an Energy Conservation Program in China," American Economic Review, American Economic Association, vol. 115(2), pages 408-447, February.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:2:p:408-47
    DOI: 10.1257/aer.20211455
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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