Foreign Direct Investment And Energy Intensity In China:Firm Level Evidence

Under the circumstances of the global warming and environmental pollution,the rapid economic growth of developing countries like China,accompanied by a large amount of energy consumption and associated greenhouse gas emissions,has attracted much attention.Given the significance of energy use emitting greenhouse gases and generating air pollution the decline in energy intensity is considerably important for both China and the global environment.In order to explore the effect of foreign direct investment on energy consumption intensity,this paper analyzes the controversy of the "Pollution Haven Effect" and think FDI technology transfer as a new perspective.The paper focuses on why and how does FDI influence energy consumption.Taking the heterogeneity of regional absorptive capacity of FDI technology transfer into account,the interaction of foreign direct investment and absorptive capacity is incorporated into the model.In addition,considering the difference of energy intensity and technology gap in different industries,the paper does sub-sample research on two typical sectors of textile industry and chemical industry.Employing a unique dataset of firm-level data of 13 cities in Jiangsu Province,we investigate the relationship between FDI and energy intensity.Finally,based on the results of the study,the policy recommendations are put forward.The main conclusions of this paper can be divided into three points:(1)compared with Non-FDI enterprises,the energy consumption intensity of FDI enterprises is lower.The reason is that local enterprises establish businesses links with advanced technology through foreign direct investment.They can absorb the green transferred technologies by foreign enterprises,optimize production and improve energy efficiency.(2)the ability of local enterprises to absorbing transfer technology varies across enterprises and regions.Foreign invested enterprises in areas with more technology expenditure consume lower energy.This indicates that the absorptive capacity of the enterprise is dependent on the level of local technology.(3)in chemical industry,the energy intensity of FDI enterprises is lower than that of Non-FDI enterprises.On the contrary,in textile industry,there is no significant difference in energy consumption intensity between FDI enterprises and Non-FDI enterprises.Because the energy intensive chemical enterprises may be higher than the textile enterprise on the sensitivity of the energy costs,and in the chemical industry,the energy saving technology gap of FDI enterprise and Non-FDI enterprise is high,stronger absorptive ability further reduce energy intensity.Compared with the previous studies,the innovation of this paper may lie in the following aspects.First,we help to illuminate the link between the induced innovation and technology transfer.This paper focuses on the energy-reducing effect of FDI through technology transfers from foreign firms.Such findings,in case of the induced innovation hypothesis,can provide convincing evidence for the invalidity of the pollution haven hypothesis(PHH).Second,empirical evidence by using a unique firm-level dataset contributes to analyzing the nexus between FDI and energy intensity.Previous studies employing macro data,such as province and city level data,hardly take firms' heterogeneity into consideration,which may lead to biased results.Firm-level data can be more informative that tell us which industrial sectors and which regions foreign capitals prefer to flow into.We have got more interesting findings from the firm-level perspective.Third,we pay more attention to the differences between regions and industries,which is hard to be observed by the macro-level data.Particularly,the capture of regional differences by regional technological expenditure,rather than economic development levels and geography,is more likely to reflect the differential absorptive capacity across regions.