The impact of differential power pricing policy on firm productivity in China: Evidence from iron and steel firms

Two-Part Tariff Policy and Total Factor Productivity of Pumped Storage Industry: Stimulation or Failure?

“…They proposed that differential pricing policy suppressed firms' total factor productivity, although this policy effect reversed after a few years. Qu et al [10] obtained similar conclusions, arguing that differential tariff policies hampered firms' scale effects, which led to a 1.20% per annum decrease in steel firms' TFP. Moreover, based on cross-country data at the industry level, Gonseth et al [18] explored the impact of energy tax policies on firms' productivity, showing that rising energy prices did not have a simple boosting or dampening effect on firms' TFP, but rather exhibited heterogeneity with the degree of human capital accumulation.…”

“…By separating the ex ante and time differences between the treatment group and the control group at the same time, the 'treatment effect' generated by exogenous policy shocks is obtained [31]. Drawing on the studies of Zheng et al [17] and Qu et al [10], we treated the TPT policy as a quasi-natural experiment and constructed a DID model to test the impact of TPT on total factor productivity in the pumped storage industry. Meanwhile, to alleviate the endogeneity problem caused by unobservable individual-varying factors and time-varying factors, we introduced both individual fixed-effects terms and time-fixed-effects terms.…”

“…This test aims to explore whether the time or trend effects are consistent between the experimental and control groups before the policy treatment. Referring to the study of Qu et al [10], the dynamic parallel trend test equation is shown below:…”

“…For the total factor productivity measure, drawing on Chen et al's [14] study, we used pumped storage generation as the output variable, which reflects the core function of supplying electricity from pumped storage power stations. However, in other studies [10,13,17], firm revenue or industry output is more frequently used, which better reflects the general function of the firm. In this regard, we remeasured the new TFP using the main business income of the pumped storage plant as the output variable and used it as a proxy variable for robustness test.…”

“…Since 2001, to foster equitable competition and improve the efficiency of SOEs, the Chinese government has presented the overall objective of market-based price reform. Many of the traditional monopolistic industries have undertaken reforms of their price mechanisms, such as the electricity industry [8], the oil industry [9] and the iron and steel industry [10]. Among these reforms, there are not only success stories, but also some failures [9], which have a lot to do with the characteristics of the industry [11].…”