Environmental efficiency, advances in environmental technology and total factor of environmental productivity of China

Abstract

Purpose – This paper aims to estimate the values of environmental efficiency of each province in China. Subsequently, it analyzes the changes of total factor productivity (TFP) before and after taking the environmental factors into account. Finally, the paper measures the effect of the components of environmental TFP on the convergence of economic growth. Design/methodology/approach – The environmental control variables are taken as output variables and combined with a traditional data envelopment analysis model to build an environmental TFP Index. The growth of environmental TFP is compared among regions and the differences are analyzed. Furthermore, the decomposed components (advances in environmental technology and environmental technical efficiency) are used for regression analysis with labor productivity. Findings – The environmental efficiency of most provinces in China has improved although some regions' efficiency remains low in Northeastern China. The value of environmental TFP is higher and more fluctuant during the period of 1997-2009 than that of traditional TFP. Technical efficiency has a convergence effect on economic growth of regions/provinces, but, after adding environmental factors, it turns into a divergence effect. Research limitations/implications – Because of data limitations, this paper does not consider the impacts of human capital and other factors on in the convergence analysis on economic. Neither does it consider the use of panel data to analyze the convergence of economic growth and validate the conclusions. These are potential further research directions. Practical implications – The study confirms that improvements in environmental technologies play a dominant role in enhancing China's environmental TFP. Furthermore, it demonstrates that China's economic growth largely depends on technological progress. This finding, that China's economic growth depends on advances in environmental technology, implies that China should strive to improve its capacity for technological innovation. Originality/value – The paper measures the value of environmental efficiency in the China's provinces and analyzes the relationship between pollution and economic development in each province. Panel data are used to compare the difference among environmental TFP, environmental factors and traditional TFP. The convergence of economic growth is analyzed in respect of environmental control variables.