The impact of OFDI on the energy efficiency in Chinese provinces: Based on PVAR model

Abstract

As an open economy, a country can achieve technological progress not only by independent innovation, but also by technology spillover through foreign trade and global investment. Since technological progress is the power source of the total factor energy efficiency (TFEE), then outward foreign direct (OFDI) can affect TFEE by technology spillover. Based on the analysis the theoretical mechanism of OFDI on TFEE from the perspective of home country, this article use the Spatial Durbin Model (SBM) to measure TFEE in 29 provinces in China and construct a panel vector autoregressive (PVAR) model to empirically analyze the dynamic influence of OFDI on TFEE. During the sample period, which we select the years from 2013 to 2017, our study’s results are as following: First, TFEE in most of provinces in China show a downward trend. Second, the spatial distribution of TFEE is relatively stable but there exists significant spatial heterogeneity. Third, OFDI can improve TFEE to a certain extent but the role is still weak and has lagging characteristics. Fourth, there is an interaction relationship between OFDI and technological innovation

Keywords

• Foreign direct investment
• Technological progress
• Reverse technology spillover
• Total factor energy efficiency
• PVAR model