How does services agglomeration affect the energy efficiency of the service sector? Evidence from China

With the increasingly prominent energy and environmental issues in the service sector, it is essential to improve the service sector energy efficiency, and the impacts of services agglomeration on service sector energy efficiency cannot be ignored. This paper explores the mechanisms behind the effects of services agglomeration on service sector energy efficiency. Provincial panel data from 2004 to 2019 in China was employed, and the impacts of services agglomeration on service sector energy efficiency were empirically analyzed using the spatial Durbin model. The results reveal that service sector energy efficiency is significantly improved by services agglomeration in local and surrounding regions. Both the specialized agglomeration and diversified agglomeration of service sector produce significant positive direct and spatial spillover effects on service sector energy efficiency. Furthermore, there are sectoral and regional heterogeneities in the effects of services agglomeration. In terms of sectoral heterogeneity, producer services agglomeration has a positive impact on the energy efficiency of the service sector in local and surrounding regions, while non-producer services agglomeration only improves the energy efficiency of the service sector in surrounding regions. In terms of regional heterogeneity, services agglomeration is shown to have a significant direct effect on service sector energy efficiency in Eastern China, and a significant indirect effect on service sector energy efficiency in Central and Western China. Lastly, relevant policy suggestions are also provided.