Effects of local and civil environmental regulation on green total factor productivity in China: A spatial Durbin econometric analysis

Abstract

This paper employs metafrontier malmquist luenberger index and a spatial Durbin model to investigate the influence of both local and civil environmental regulation and its spatial spillover effect on green total factor productivity in 273 cities of China in 2003–2013. According to city political attribute and regional differences, this article divides the sample city into six categories. The results show that effect of local environmental regulation on green total factor productivity is significantly positive in high political attribute cities (A1 and A2 zone), but negative effects in lower political attribute cities (B2 and B3 zone). Moreover, the ‘race to the top’ results in significantly positive spatial spillover effects from local environmental regulation on green total factor productivity in high political attribute cities (A1 and A2 zone), while the ‘race to the bottom’ causes significantly negative spatial spillover effects in lower political attribute cities (B2 and B3 zone). As for civil environmental regulation, it has positive direct and indirect effects in promoting green total factor productivity. We further find that environmental regulation inhibits the original technological innovation of enterprises, which suggests that government should reduce market intervention, improve enterprise flexibility of market change, and promote enterprises to carry out the original technological innovation. Thus, the government and citizen should make targeted pollution-reduction policies for the green total factor productivity increase.