Environmental Legislation, Resource Allocation Efficiency and the Green Growth of Industry: Based on Global Malmquist-Luenberger Productivity Index and Difference-in-Difference Method

Abstract

Facing with severe environmental constraints, will the promulgation of environmental laws and regulations be conducive to promoting the green growth of industry in developing country? This paper tries to answer it by providing an empirical study of China. Based on the SBM Directional Distance Function, we first calculated the green growth index of industry and its decomposition, and then investigated the heterogeneous effects of environmental legislation on the industrial resource allocation efficiency and the green growth of China's industry. The paper reveals some following findings. First, local environmental legislation is conducive to promoting the green growth of China's industry. Meanwhile the mismatch of resource allocation shows negative effects on it. This result remains robust after considering some controlled variables at the enterprising and regional levels or using different methods. Second, local environmental legislation can alleviate the negative effects of resource allocation mismatch on the green growth of China's industry by presenting positive moderating effects. Third, the effect of local environmental legislation on technological progress is more significant than that of technical efficiency, which implies an obvious anti-driving mechanism of local environmental legislation on the technological innovation. Finally, we propose some policy implications on how to achieve the green growth of industry by implementing efficient environmental legislation and optimizing industrial resource allocation efficiency in transitional economy.