Strategic interactions of Chinese cities in improving total factor energy efficiency: a two-regime spatial econometric analysis

Exploring the strategic interactions of Chinese cities in improving total factor energy efficiency (TFEE) is crucial for promoting regional sustainable development. However, existing literature lacks a comprehensive analysis of the complex patterns and mechanisms of these interactions. Using city-level data from 2006 to 2017, this study contributes to the literature by employing single-regime and two-regime spatial Durbin models to investigate the spatial spillover effects and strategic interactions of cities’ TFEE improvement. The results reveal significant positive spatial autocorrelation and spillover effects of TFEE among cities. While factors like environmental regulation and fiscal decentralization influence TFEE, their spillover effects vary across different regional relationships. Furthermore, the two-regime model uncovers asymmetric strategic interactions: geographically adjacent cities tend to engage in “race to the bottom” competition, while economically similar cities exhibit both “race to the top” and “race to the bottom” behaviors. In short, local cities will adopt imitation or differentiation strategies according to the changes in the TFEE levels of neighboring cities, taking into account their own geographic location and level of economic development, and form different strategic interaction patterns, thus affecting the overall TFEE levels and sustainable development of the region.