Electricity market integration and regional inequality: a research framework for China

Electricity market integration lowers system costs but redistributes economic opportunity across regions. Whether it narrows or widens regional inequality depends on the balance between two opposing forces: broader access to affordable electricity that benefits lagging regions, and the concentration of firms and jobs in already advantaged regions. We develop a conceptual framework that links electricity market integration to regional inequality, and we define integration depth as a measurable institutional index distinct from physical transmission capacity. The framework yields four competing trajectories, i.e., declining, inverted-U, U-shaped, and rising inequality, distinguished by observable differences in delivered electricity costs, firm entry, employment, and migration. We further illustrate how Chinese provinces can be grouped along observable dimensions that distinguish these trajectories. Policy should target the mechanism behind an observed distributional outcome rather than assume that integration alone will reduce regional inequality.