Abstract
Green development is an inevitable requirement to build a modern economic system and fundamental solution to pollution problems. Exploring the relationship between environmental regulation and enterprise total factor productivity (TFP) has great significance for realizing the win-win goal of achieving both environmental protection and economic development. Based on a firm-level dataset from 2000-2007, this paper explores the economic effects of the Environmental Target Assessment Policy of Huai River Basin (ETAP, HRB) in 2004, an environmental regulation that clarifies the responsibility of local governments, by identifying changes in the TFP of the clothing industry (CMI). The empirical findings support that the ETAP can significantly promote improvement in the TFP using the difference in differences (DID) method. Robustness tests, such as the triple differences (DDD) and propensity score matching-difference in differences (PSM-DID), are used to address concerns about the DID approach. Analysis of dynamic effects shows that the ETAP has no impact on enterprise TFP in 2004 but significantly improve the TFP on the next three years (2005-2007). The heterogeneity test results indicate that nonstate-owned enterprises are more sensitive to the ETAP, and the coefficient of the average treatment effect is 0.033. In addition, the ETAP has no noteworthy impact on large- and medium-scale enterprises but results in an average increase of 0.037 in small-scale enterprises’ TFP.
Highlights
Over the past 40 years of reform and opening up, China’s economy has rapidly developed and achieved remarkable accomplishments
We find that this policy has a significant positive impact on the total factor productivity (TFP) regardless of whether control variables and the related fixed effects are considered
The results show that the regression coefficient of this policy on TFP is 0.568 and significant at the 1% level, indicating that the signing of the responsibility agreement significantly improves enterprise TFP
Summary
Over the past 40 years of reform and opening up, China’s economy has rapidly developed and achieved remarkable accomplishments. The Huai River originates in the Tongbai Mountain of Henan Province, covering four provinces, Henan, Anhui, Jiangsu, and Shandong, an area of 260,000 square kilometers It occupies a very important strategic position in the Chinese economy. The PRC State Environmental Protection Administration and the governments of four provinces signed the Target Responsibility Statement for the Prevention and Control of Water Pollution in the HRB. This target responsibility system for environmental protection is a system initiated by the Chinese government. National Environmental Protection Agency pointed out that in 2005, the overall water environment quality of the HRB showed a trend of improvement, no major pollution accidents occurred in the main stream of the Huai River [53]
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