Study on the Effect of Foreign Direct Investment and Foreign Trade on Energy Efficiency in the Yangtze Delta Region Using Stochastic Frontier Analysis Approach

Abstract

With the development of an open economy in the Yangtze Delta region, energy has increasingly become an bottleneck for rapid economic development. Opening up will promote economic expansion and affect the efficiency of energy utilization in the process of economic development. The proper evaluation of the impact of opening up on the efficiency of energy utilization will help the intensity and direction of open door policy adjustment. The paper used the stochastic frontier analysis (SFA) approach to investigate the effect of foreign direct investment (FDI) and foreign trade on the efficiency of energy utilization of the Yangtze Delta region in China. The results show that FDI and foreign trade both are very vital for the improvement of the efficiency of energy utilization. Moreover, the elastic of FDI on the energy efficiency is larger than the elastic of foreign trade on the energy efficiency.