The effect of environmental regulation on green total-factor productivity in China's industry

Abstract

Employing both the meta-frontier and the non-radial directional distance function methods, we estimate the industrial GTFP and its decomposition from 2000 to 2019 in 30 Chinese provinces. Following this, a dynamic spatial panel model is employed to test the effects of the policy, the mechanisms of action and the channels of two sorts of environmental regulations on GTFP. The results show that, compared with a single policy, a combination of policies is more conducive to GTFP growth. Further analyses of the mechanisms indicate that command-and-control (management) environmental regulations will boost the expansion of GTFP. This is mainly achieved by improving technical efficiency and narrowing the technical gap. Market-based environmental regulations can also accelerate the growth of GTFP, principally through improvements in the advancement of technology and a narrowing of the technological gap Increased GTFP growth can be achieved via these three effects by using a policy mix.