Exploring the impact of urban shrinkage on energy efficiency: Evidence from Japan's 47 prefectures

Urban shrinkage is becoming an increasingly critical issue worldwide, presenting new challenges for cities seeking to achieve sustainable development. Understanding how it relates to energy performance is essential for shaping resilient urban planning strategies. This study investigated the relationship between urban shrinkage and energy efficiency in Japan, a country experiencing prolonged population decline and uneven regional development. A multi-dimensional Urban Shrinkage Index (USI) was constructed to capture the urban dynamics across Japan's 47 prefectures from 2007 to 2021, and energy efficiency was estimated using stochastic frontier analysis. Through panel regression, the study identifies a nonlinear relationship between shrinkage and efficiency, with an inverted-U pattern aligning with the Kuznets Curve. It indicates that moderate shrinkage may initially support improvements in efficiency but, as shrinkage intensifies, structural inefficiencies emerge, and energy performance deteriorates. A spatial Durbin model further reveals significant spillover effects, indicating that regional interactions play an important role in shaping energy outcomes. These findings highlight the importance of integrating urban planning and energy strategies that are adaptive and spatially sensitive to support sustainable development.