Abstract
Abstract Balancing environmental benefits with economic gains is a crucial challenge for developing countries striving for sustainable development in today’s context. On January 1, 2018, China transitioned from a sewage charge system to an environmental protection tax (EPT). This shift aims to determine whether it can incentivize businesses to enhance quality and efficiency, thereby achieving high-quality development while ensuring that both environmental and economic interests can thrive together. This paper examines the transition from environmental protection fees to tax (TEPFT) as a quasi-natural experiment. Utilizing microdata from A-share listed companies between 2013 and 2022, it focuses on manufacturing enterprises—characterized by high inputs, consumption, and pollution—as the experimental group. In contrast, non-manufacturing enterprises in the cleaning industry serve as the control group. Employing both difference-in-differences (DID) and triple-difference models, the study empirically analyzes the impact of the environmental protection fee tax change on the total factor productivity (TFP) of manufacturing firms. The findings indicate that: (1) the TEPFT significantly enhances the TFP of the manufacturing sector by 0.049 units. (2) this improvement in TFP is primarily driven by increased technological innovation within manufacturing enterprises. Additionally, while effective management practices have a positive moderating effect, financing constraints hinder this progress. (3) the impact of the TEPFT on TFP is particularly pronounced in state-owned enterprises and in provinces where tax rates are elevated.
Published Version
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