The source of discrepancies in the empirical study of complementarity or substitutability between energy and non-energy inputs remains controversial. The present study seeks to motivate and initiate exploration of alternative ways of explaining the disparity. A translog cost function is estimated by time-series data for three inputs: capital, labour and energy of 29 provinces in China. Employing the threshold effect model, we obtain the overwhelming evidences of a threshold point which separates the substitution of energy and non-energy by energy efficiency. The findings imply that the energy-saving technologies are encouraged to be applied or invested in regions with comparative higher energy intensity, which would receive better effects.
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