Integrating economic, environmental and societal performance within the productivity measurement

Abstract

• The comprehensive TFP in China is calculated by integrating economic, environmental and societal performance. • A novel nonparametric approach incorporating the three dimensions is utilized. • Medical care provided the largest contribution for the increase of TFP. • China's TFP growth rates differ significantly across different regions. Total factor productivity (TFP) indicators or indices are usual measurements for evaluating economic performance in terms of output and input evolution. This approach has been extended in the environmental dimension in the literature. However, the social dimension is equally important for a comprehensive TFP, which is ignored in existing studies. Using provincial-level data from 2000 to 2017 in China, this paper applies a novel nonparametric approach incorporating three dimensions (economy, environment and society) to estimate the Luenberger productivity indicator in order to understand how to realize sustainable and high-quality development. Then, the overall productivity gain is decomposed into three different parts to evaluate economic, environmental, and social performance. The results show that the growth rate of TFP in China within the sample interval was 6.822%. Regarding its decomposition, medical care provided the largest contribution to the increase in TFP (3.840%), followed by emission reduction (1.981%), economic growth (0.975%), education (0.016%) and employment (0.010%). However, there is regional variety showing that eastern China had high-quality TFP growth (4.696%), while the TFP change was negative (-1.165%) in western China due to an inferior economy, environment, and educational development.