Assessment of Resource Misallocation and Economic Efficiency Losses in Chinese Cities: A Heterogeneity Perspective on Renewable and Non-Renewable Energy Sources

The misallocation of renewable (RE) and non-renewable energy (NRE) resources may lead to the inefficiency of economic development, thereby hindering the achievement of sustainable development goals. Basing data on 282 Chinese cities during 2005–2021, a relative factor price distortion coefficient was employed to estimate the degree and direction of resource misallocation (RM) for RE, NRE, capital, and labor at both the aggregate city level and across four disaggregated city categories. Output gaps and efficiency losses are further quantified by incorporating RM analysis into the economic growth accounting framework, revealing significant heterogeneity in RM across cities. Findings show that (1) RE and labor misallocation exceed those of NRE and capital at the city level. RE misallocation is dominant in energy misallocation. There exists an underallocation of RE, NRE, and labor, while capital is overallocated. (2) Renewable energy input and output (RE-IO) cities exhibit the highest overall RM (32.1%), whereas renewable energy input (RE-Input) cities possess the lowest ones (21.2%). Four city types demonstrate an underallocation of RE and an overallocation of capital. (3) Both output gaps and efficiency losses are on the rise. Output changes sources are transferred from the variations in factor inputs to those in total factor productivity (TFP). The contribution from the RM changes is limited. The results provide a reference for reducing RM and achieving energy transition.