How urbanization affects China's energy efficiency: A spatial econometric analysis

This paper investigates the impact of urbanization on provincial energy efficiency in China. Using panel data of 30 Chinese provinces between 2003 and 2014, we adopt a stochastic frontier model to estimate energy efficiency in China, and apply a series of spatial panel data models to tackle spatial dependence of energy efficiency between provinces. Our results show that the overall impact of urbanization on energy efficiency is negative in China. These results are established after controlling for spatial correlation and other confounding factors, and are also robust to various model specifications. We also document that the impact of urbanization on provincial energy efficiency manifests through both a direct negative impact induced by the focal province's urbanization process, and an indirect positive spillover effect caused by urbanization in adjacent areas.