Trade and Development Seminar with Daniel Yi Xu (Duke)

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 in the same 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. We quantify that a
$160 social cost of carbon rationalizes the policy and that alternative policies that exploit
public information on business networks can increase aggregate energy savings by 10%. 

Paper (PDF)

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