How does energy consumption affect China's urbanization? New evidence from dynamic threshold panel models

Abstract

Energy consumption may play different roles at different stages of urbanization and economic growth. Given China's rapid economic development and urbanization process, this study tries to explore the possible nonlinear relationship between energy consumption and urbanization in China. Against the background of promoting new-type urbanization, the level of China's urbanization is evaluated comprehensively using the entropy method. A newly-developed dynamic threshold panel model is employed to examine the nexus of energy consumption and comprehensive urbanization with full consideration of heterogeneous characteristics. The Panel Data Vector Autoregression, or PVAR, model is also used to estimate the direct effects of various energy consumption patterns on the urbanization. The empirical results indicate that the nexus of energy consumption and urbanization is indeed nonlinear and that energy consumption is conducive to promote China's urbanization at the current stage of development. However, the positive effect decreases when there is an increase in energy consumption intensity and energy consumption scale, whereas the effect increases with the promotion of energy consumption structure.