City Research Online

Abstract

This paper employs the theory of biased technological progress to assess the effects of technological advancements across diverse trades, with a particular emphasis on predicting energy efficiency. A translog cost function model is developed, integrating five critical types of energy inputs. The empirical analysis is conducted using a comprehensive panel dataset comprising 26 major sub‐sectors within China's manufacturing industry. The results indicate that diesel exhibits the highest own‐price elasticity, whereas electricity the lowest. Further analysis highlights the factor substitution relationships and the bias of technological progress through productive service trade and commodity trade channels, providing insights into shifts in energy consumption patterns. Changes in energy efficiency are decomposed into factor substitution effects and technological progress effects via trade channels. The findings reveal the presence of Morishima substitution among three factors. Specifically, productive service trade and commodity imports show a bias towards the combination of energy with labor and energy with capital, while commodity exports are characterized by labor‐ and capital‐biased technological progress. The contributions of factor substitution and the three trade channels demonstrate divergent impacts on energy efficiency improvements across the overall manufacturing sector, as well as within high‐energy‐consuming and high‐tech sub‐sectors. Overall, our study enhances the understanding of energy efficiency trends and technological progress in trade‐related manufacturing activities, offering a robust foundation for future forecasting.

Publication Type:	Article
Additional Information:	© 2025 The Author(s). Journal of Forecasting published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords:	energy efficiency, factor substitution, forecasting and analysis, productive service and commodity trade, seemingly unrelated regression, technological progress
Subjects:	H Social Sciences > HG Finance T Technology > T Technology (General)
Departments:	Bayes Business School Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:	Symplectic Administrator

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