Can increasing economic complexity improve China's green development efficiency?

Abstract

In the context of China's efforts to promote green development, how to improve the green development efficiency (GDE) has become an increasingly important research topic. Promoting the transformation towards a knowledge- and technology-intensive economic structure may be an important way to improve the GDE. Therefore, this study examines the impact of economic structural transformation represented by economic complexity on China's GDE. This study first measures the economic complexity index (ECI) and GDE of China's provinces using the method of reflections and data envelopment analysis window model, then examines the impact of the ECI on China's GDE based on a panel data model. It further analyses the contribution of ECI to regional differences in GDE and the mechanism of the effect of ECI on GDE using the regression-based Shapley decomposition analysis approach and a mediating effect model, respectively. Five conclusions are obtained as follows. Firstly, the ECI in China decreased from the east to the west, while the GDE shows the characteristics of ‘a higher GDE in the east and south and a lower GDE in the west and north’. Secondly, the empirical results show that the ECI has a significant positive impact on the GDE, and the results of the robustness tests support this finding. This indicates that increasing economic complexity plays an important role in promoting the green development of China's provinces. Thirdly, significant regional differences exist in the impact of economic complexity on the GDE. Fourthly, the decomposition results of regional differences in the GDE suggest that economic complexity is a primary factor that causes the differences in the GDE among China's provinces. Fifthly, the estimation results of the mediating effect model indicate that increasing economic complexity can improve the GDE by enhancing innovation and human capital levels. These findings suggest that China can promote regional green development by developing policies related to enhancing economic complexity and fully releasing the effects of economic complexity on innovation and human capital.