Does manufacturing agglomeration promote green productivity growth in China? Fresh evidence from partially linear functional-coefficient models

Abstract

The influence of manufacturing agglomeration on economic efficiency is substantial, yet its effects on Green Total Factor Productivity (GTFP) are still subject to debate. It is vital to comprehend the relationship between these two factors to craft effective sustainable development policies. Employing the newly developed partially linear functional-coefficient panel data approach, this study examines the nonlinear relationship between manufacturing agglomeration and GTFP, with a comprehensive consideration of the heterogeneity inherent to city geographical attributes and urban scale. Our results reveal that manufacturing agglomeration, on average, fosters GTFP, while the positive effect consists of two opposite components. Agglomeration promotes the diffusion of technology at any stage of urban development, but it can lead to congestion effects in well-developed economies, thereby diminishing efficiency. Our nonlinear approach indicates the turning points of the negative impact. Additionally, the heterogeneity of the relationship between agglomeration and GTFP across cities with varied locations and scales suggested that strategies for manufacturing agglomeration and green development should be tailor-made for individual city types.