American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Regulating Conglomerates: Evidence from an Energy Conservation Program in China
American Economic Review
vol. 115,
no. 2, February 2025
(pp. 408–47)
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.Citation
Chen, Qiaoyi, Zhao Chen, Zhikuo Liu, Juan Carlos Suárez Serrato, and Daniel Yi Xu. 2025. "Regulating Conglomerates: Evidence from an Energy Conservation Program in China." American Economic Review 115 (2): 408–47. DOI: 10.1257/aer.20211455Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- L22 Firm Organization and Market Structure
- L51 Economics of Regulation
- L60 Industry Studies: Manufacturing: General
- P28 Socialist Systems and Transitional Economies: Natural Resources; Energy; Environment
- P31 Socialist Enterprises and Their Transitions
- Q48 Energy: Government Policy