Total Factor Productivity Change Research Articles

Trajectories to high income: Comparing the growth dynamics in China, South Korea, and Japan with cointegrated VAR models

We analyze and compare the patterns of economic growth and development in China, South Korea, and Japan in the post-war period. The geographical proximity and cultural affinity between the three countries, as well as the key role of the development state in their economies, suggest that an analytical comparison would be a meaningful and valuable exercise. Furthermore, South Korea and Japan are two of the few economies that have jumped from middle income to high income in a short period and thus offer potentially valuable lessons for China. We use Cobb–Douglas production functions to assess the long-run equilibrium relationships between per capita GDP, capital, and labor by means of cointegrated vector autoregressive (CVAR) models. We show that such equilibrium relationships cannot be rejected for all three countries, while the evidence is stronger for China and South Korea than for Japan. Our hypothesis tests show that the estimated Cobb–Douglas production functions display coefficients of capital and employment that sum up to 1 and broken linear trends that can be attributed to structural breaks and (changes in) total factor productivity (TFP) growth. We observe a striking similarity between the experience in South Korean and China, which gives some optimism that the China may be capable of graduating to high income, like South Korea.

GIP Evaluation and Path Improvement of Technological SMEs Based on Digital Information Technology

Small and medium-sized technology-based SMEs also play a certain role in promoting the economic development and social progress of a country and can provide relative social resources. However, under the wave of green development, green technology innovation for SMEs is also important, which is of great significance to the sustainable development of enterprises. This paper summarizes the situation of a certain stage of Chinese enterprises’ green technology innovation and builds a GIP evaluation index system suitable for small and medium-sized technology-based enterprises. This paper selects Z province for analysis and uses data envelopment analysis and Malmquist index analysis to analyze the GI situation of 11 cities in Z province. And this paper proposes a green innovation performance (GIP) evaluation path for technology-based SMEs. The results show that the overall green innovation (GI) level of Z province shows an upward and progressive trend from 2016 to 2020, and the total factor productivity change index (TPF) in the overall period from 2018 to 2020 is 0.913. The overall GIP of enterprises in cities C and D in Z province is insufficient and needs to be further expanded.

Analysis on Total Factor Productivity and Differences of Industrial Internet Concept Companies

Based on the Malmquist-DEA model and the DEA-BCC model, using the data of 53 industrial Internet-listed companies, the total factor productivity (TFP), technological progress (TC), and technical efficiency changes of the industrial Internet industry were measured from static and dynamic perspectives (EC), and used the coefficient of variation to further analyze the variance variables that measure the differences between enterprises in various subsectors in the industrial Internet industry. The study pointed out that the overall productivity level of the industrial Internet industry in 2015 to 2019 was low, and the fluctuation range was large, especially the sharp drop in productivity in 2016 to 2017, which had a serious impact on the entire industry. At the same time, changes in technical efficiency are the main reason for the decline in total factor productivity after 2015. Among various industries, the Malmquist indices of manufacturing and information transmission, software, and information technology services are all less than 1, and there is little difference in production efficiency and changes between the two. This study provides a reference for the productivity measurement of the industrial Internet industry based on the Malmquist-DEA model and provides practical inspiration for future management activities.

Trends and determinants of total factor productivity in Rice (Oryza sativa) and Wheat (Triticum aestivum)

The study estimates total factor productivity (TFP) in rice (Oryza sativa L.) and wheat (Triticum aestivum L.) which form the mainstay of food security in India. The study period is 25 years from 1991–92 to 2015–16, secondary data from 12 major rice and wheat producing states was collected from Directorate of Economics and Statistics (DES). Results depict declining mean TFP for both rice and wheat in the period II (2002–2015) compared to period I (1991–2001) of study. Major producing states have been facing stagnation in productivity and the results also confirm the proposition that technical efficiency could not catch up with the technical progress in both wheat and rice cultivation. Hence, the results confirm that the TFP change was associated more with technical change than with efficiency change in all the states during both the study periods. Thus, the results conclude that the agricultural development strategy has to pay increased attention towards the factors that could influence the efficiency as well along with the factors that result intechnical progress especially in case of rice and wheat which constitute the Indian food security basket.

A cross-country efficiency and productivity evaluation of commercial banks in South Asia: A meta-frontier and Malmquist productivity index approach.

South Asia primarily consists of developing economies with diverse financial systems. The commercial banking industry plays a crucial role in each country’s financial development in the region. This research aims to evaluate commercial banking industries’ efficiency and productivity growth in the South Asian (SA) region over 6 years (2013–2018). In addition, the technology gap among the banking industries of all countries is also explored. Data envelopment analysis (DEA) Meta-frontier is employed to measure the technical efficiency (TE) and technology gap ratio (TGR) among the countries. Further Malmquist productivity index (MPI) is used for productivity change estimation. Results indicate that, on average, 147 commercial banks (CBs) have a technical efficiency score of 0.6208, while CBs in Nepal are the most efficient in the region with an average score of 0.7153. The Meta frontier analysis also confirms the presence of different production technologies in CBs. Nepal’s CBs group frontier is closer to meta-frontier (technology gap ratio, TGR = 0.9361) While, Bangladesh, Pakistan, India, and Sri Lanka rank second, third, fourth, and fifth, respectively. The results of productivity contend that the total factor productivity change of all 147 CBs decreases by 0.8 percent on average over the study period. CBs have enhanced their productivity growth in Sri Lanka, Nepal, and Pakistan, but declining trends have been witnessed in Indian and Bangladesh’s commercial banking industries.

Climate, Environment and Socio-Economic Drivers of Global Agricultural Productivity Growth

Growth in total factor productivity (TFP) indicates the sustainable and/or judicious use of scarce resources, including non-renewables. This paper identifies sources of growth in global agricultural TFP and its finer components, ranging from climate, production environment, and socio-economic factors, using a panel data of 104 countries, covering a 45-year period (1969–2013); and, finally, projects changes in TFP from increased climate variability. The results revealed that global agricultural productivity grew consistently at a rate of 0.44% p.a., driven by technological progress and mix-efficiency change, with negligible contributions from technical- and scale-efficiency changes; albeit with variations across regions. Both long-term and short-term climatic factors and the natural production environment significantly reduce global agricultural productivity, whereas a host of socio-economic factors have a significant but varied influence. The projected increased level of future climate variability will significantly reduce future agricultural productivity. Policy implications include investments in crop diversification, education, agricultural spending, number of researchers, and country specific R&D.

How Efficient are Basic Public Health Services Between Urban and Rural in Shandong Province, China? A Data Envelopment Analysis and Panel Tobit Regression Approach.

BackgroundImproving basic public health services efficiency becomes priority to guarantee its sustainability for Chinese government. This study aimed to explore basic public health services efficiency and its influencing factors between urban and rural in Shandong Province, China, providing policy implications to improve efficiency.MethodsThis research assessed basic public health services efficiency of 54 districts (representing urban) and 83 counties (representing rural) in Shandong, China, from 2014 to 2019. The data were obtained from Medical Management Service Center of Shandong Health Commission and Statistical Yearbooks. Input variables were subsidy funds, public health staffs and material expenditures. Output variables were assessment indicators covered all service contents from national standard. The data envelopment analysis and panel tobit regression were used to measure efficiency scores and efficiency influencing factors.ResultsBasic public health services efficiency scores of urban were higher than those of rural during 2014 to 2019. Scale efficiency change and technological change promoted basic public health services total factor productivity change of urban and rural respectively. Panel tobit regression indicated that proportion of health expenditures in general public budget expenditures (P<0.01), subsidy funds (P<0.01), public health personnel expenditures (P<0.01) and the frequency of professional health institutions’ guidance (P<0.01) were positively associated with efficiency in both urban and rural. The number of primary medical and health institutions and public health personnel were positively associated with urban (P<0.01), but those did not affect rural (P>0.10).ConclusionTo improve basic public health services efficiency, urban should focus on health resource structure, especially increasing primary medical and health institutions and public health personnel. Rural should expand the input scale, paying more attention to subsidy funds and public health personnel expenditures. The government should also care strengthening the guidance to primary medical and health institutions from professional health institutions.

Telecommunications, productivity and regional dependence: a comparative analysis between the Brazil, China and main developed regions in the post-reform period

In the last two decades, new technologies and the rapid growth of the telecommunications sector have changed production and trade relations in world economic systems. Regional dependence on the level of productivity, supply and demand of telecommunications has increased worldwide. Our study analyzes the changes in total factor productivity (TFP) of telecommunications and verifies its global and regional importance between 2000 and 2014. We apply the TFP decomposition and extraction technique in an input−output model. The main findings suggest improved efficiency has resulted in TFP gains in developed countries, whose variations were lower than those of Brazilian telecommunications, which exhibit a low capital—labor ratio. Moreover, global and regional dependence is more sensitive to supply than the demand for telecommunications. Although the main effects on the regional output are intraregional, the backward and forward effects denote a heavy regional reliance on USA telecommunications and reciprocity between China and European countries. The increase in telecommunications influenced by national policies in countries with little emphasis on regional composition should generate minor marginal gains in TFP, even with the gain in productive efficiency. These policies are also expected to reduce the dependence on American and Chinese telecommunications.

Technical Efficiency, Productivity, and Determinants of Technical Inefficiency of Local Hospitals in Oman: Using Data Envelopment Analysis

Purpose of the study: Evidence suggested that inefficiency is a significant problem for many health systems around the world and, in particular, in developing countries. Oman's health system increasingly faces critical resource constraints to deliver the same or better health services. Better utilization of hospital resources will enable more services to be provided and allow the redistribution of potential resources to ensure equity, accessibility, and the delivery of sustainable quality care. Therefore, this study aims to assess the technical efficiency, productivity, and determinates of technical inefficiency of local hospitals in Oman. Methodology: Input-oriented Data Envelopment Analysis (DEA) approach was used to assess the technical efficiency of 29 local hospitals in Oman under constant return to Scale (CRS), variable returns to scale (VRS) and scale efficiency (SE) using 2018 data. Tobit model was used to assess the determinants of hospital inefficiency. The DEA based Malmquist Productivity Index (MPI) was applied to the panel data to measure the Total Factor Productivity Change (TFPCH) between 2015 and 2018. The STATA IC 16 software was used to conduct this evaluation. Main Findings: 75.8% of local hospitals were technically efficient under VRS and SE assumptions, and 79.3% achieved technical efficiency under CRS assumption. The average technical efficiency score under CRS, VRS and SE were 96%, 97% and 99%, respectively. Tobit's model suggested that the number of physicians and pharmacists negatively correlated with the VRS score at p level &lt; 0.05 and &lt; 0.01, respectively. Furthermore, the Tobit model suggested that the number of outpatient’s visits positively correlated with the VRS efficiency score at p level &lt; 0.01. Local hospitals showed a productivity growth by 18.1% during 2015-2018, mainly attributed to the increase in technological change by 42.6%. Research Implications: The results suggested that one-quarter of local hospitals in Oman were technically inefficient. This study identifies opportunities for improving local hospital performance through efficient utilization of health resources and proper redistribution of human resources. The novelty of the study: This is the first study to assess the technical efficiency, productivity, and determinants of technical inefficiency of local hospitals in Oman. It is hoped that the findings of this study can inform decision-makers to tailor their policies towards better and more efficient utilization of the existing resources.

Analysis Method of Agricultural Total Factor Productivity Based on Stochastic Block Model (SBM) and Machine Learning

When analyzing agriculture’s total factor productivity, traditional measurement approaches do not take into account the inefficiency value. The production functions are assumed to be analyzed on basis of the random boundaries, which makes the analysis results inaccurate and unreliable. As a result, this paper proposes an analytical approach for agricultural total factor productivity based on the stochastic block model (SBM), which combines the benefits of statistics and machine learning. It uses the SBM direction distance function and the Luenberger productivity index to measure the agricultural efficiency, total factor productivity, and their components. The research study considers the data from 31 provinces from 2006 to 2018 years. First, one output indicator and six input indicators are established. The time-varying variations of the national agricultural inefficiency value and its source decomposition under variable scale returns are then determined using the SBM-based algorithm of agricultural total factor productivity and the obtained sample data. The changes of the agricultural total factor productivity and its components are comprehensively analyzed. Following an examination of the elements impacting agricultural efficiency and productivity, the socioeconomic development of the agricultural total factor productivity is examined in order to achieve efficient growth.

A study on the interaction between logistics industry and manufacturing industry from the perspective of integration field.

Studying the linkage between manufacturing industry and logistics industry is conducive to explore and improve the efficiency of the common development of them. In order to study the interaction of logistics industry on the development of manufacturing industry and the development of two-industry-linkage, it first calculates the high-quality development level of logistics industry and manufacturing industry, then uses the coupling coordination model to theoretically analyze and empirically test the coupling and coordinated development level of high-quality development of logistics industry and manufacturing industry from three aspects: coupling degree, coordination degree and coupling coordination degree, and based on the perspective of integration field theory, it takes the three basic synthetic fields of logistics integrator, logistics base-nuclear and logistics connection-key as the analysis dimension, PVAR model was introduced for in-depth analysis the impact of logistics industry on manufacturing industry and the level of the two-industry-linkage. It was found that the high-quality development of China’s logistics industry and manufacturing industry is close on the whole, and the development trend is consistent, the high-quality development of them is mainly caused by the change of scale, but there is no obvious change in technical efficiency, which also provides a way for the high-quality development of the two-industry-linkage in the future. The two-industry-linkage mostly belongs to the situation of low-level mutual restriction, which has not yet reached a high level of mutual promotion, resulting in the overall coupling coordination degree basically in a state of barely coordination. The development of logistics industry and manufacturing industry need to go through certain practice and running in, when there is an error matching between the two, the logistics industry will inhibit the two-industry-linkage. When the economy develops to a certain extent, the expansion of the logistics system scale to the level of the two-industry-linkage is not necessarily beneficial, blindly exceeding the demand for logistics investment will cause a waste of resources, which is not conducive to the high-quality development of the logistics industry and the coupling and coordinated development of the two industries. In the long run, the change of the logistics basic-nuclear capacity, the logistics integrator scale and logistics connection-key level will have a positive impact on the change of green total factor productivity in manufacturing industry.

Measuring technical efficiency and total factor productivity change with undesirable outputs in Stata

In this article, we introduce two community-contributed data envelopment analysis commands for measuring technical efficiency and productivity change in Stata. Over the last decades, an important theoretical progression of data envelopment analysis, a nonparametric method widely used to assess the performance of decision-making units, is the incorporation of undesirable outputs. Models able to deal with undesirable outputs have been developed and applied in empirical studies for assessing the sustainability of decision-making units. These models are getting more and more attention from researchers and managers. The teddf command discussed in the present article allows users to measure technical efficiency, both radial and nonradial, when some outputs are undesirable. Technical efficiency measures are obtained by solving linear programming problems. The gtfpch command we also describe here provides tools for measuring productivity change, for example, the Malmquist–Luenberger index and the Luenberger indicator. We provide a brief overview of the nonparametric efficiency and productivity change measurement accounting for undesirable outputs, and we describe the syntax and options of the new commands. We also illustrate with examples how to perform the technical efficiency and productivity analysis with the newly introduced commands.

Integrating economic, environmental and societal performance within the productivity measurement

• 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.

Productivity changes in the automotive industry of three European countries. An application of the Malmquist index decomposition analysis

This paper analyzes the changes in productivity of small and large firms operating in the automotive industry in France, Italy and Spain, occurred during the pre-crisis (2001-2008) and post-crisis (2009-2014) periods. To this aim, the Malmquist index as a measure of total factor productivity (TFP) variation is computed, by using the non-parametric technique DEA, integrated by a bootstrap technique proposed by Simar and Wilson (1999). The analysis allows distinguishing among different possible sources of TFP changes, i.e. pure technical efficiency change, scale efficiency change and technological change. The latter comes up to be the main channel through which the global crisis negatively impacted on productivity, presumably by hampering the primary engines of technological change, i.e. research, innovation and investment through reduced availability of financial resources for SMEs, worsened perspectives for firm growth and greater concentration in selected geographical areas of investments by parent companies.

Benchmarking of the Electricity Sector in East Africa: An Assessment of Technical Efficiency

The electricity sector has globally been subject to reforms since the 1990s. The reforms consisted of unbundling vertically integrated monopolies and attracting the private sector with a view of improving quality of service (QoS) and technical efficiency. In some East African countries, however, the electricity sector remains vertically integrated. Controlling electricity losses has been difficult, resulting in poor QoS. This paper analyzes and compares the performance of the East African power sector with regard to QoS. A non-parametric approach, Data Envelopment Analysis (DEA) was used to estimate the technical efficiency scores and the Total Factor Productivity Change (TFPC) for productivity improvement under two models, generation and transmission-distribution (TD). Data comprising two outputs and three inputs was collected in Burundi, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda for the period 2008-2017. On average, the East African power sector exhibits performance gaps of 20% for the generation model, and 22% for the TD model. In the generation model, it exhibits Decreasing Returns to Scale (DRS) at a frequency of 34 out of 60, compared to 16 for Increasing Returns to Scale (IRS) and 10 for Constant Returns to Scale (CRS). However, in the TD model, IRS are the most dominant, with a frequency of 31 out of 60 compared to 19 and 10 for DRS and CRS respectively. Inefficiency is largely attributed to excess inputs, including high-voltage transmission line lengths and electricity losses, as well as a shortage of outputs, such as the number of customers. The study also shows a global productivity improvement, which is linked to efficiency change for the generation model and technological change for the TD model. Specifically, countries that have attracted the private sector into the generation and/or distribution sectors have improved their productivity compared to others with state-owned utilities.

Nexus Between Economic Efficiency, Healthcare, and Environmental Expenditures: A Perspective of BRI Countries.

Public health and the environment are the most essential pillars, and play a vital role in the economy. In order to better public health, the economic and environmental atmosphere must be stable and clean, respectively. Thus, this paper emphasizes on nexus between economic, public health, and the environment. Therefore, the objective of this paper is whether healthcare and environmental expenditures affect economic efficiency and vice versa. So, this study evaluates the performance of the country's economic efficiency and investigates the effect of healthcare and environmental expenditures for 62 Belt and Road Initiative countries for the period from 1996 to 2020. Suitable input-output variables are employed under the framework of DEA-window and Malmquist Index Productivity, and Stochastic Frontier Analysis (SFA). In addition, this study estimates the relationship between economic efficiency, healthcare, and environmental expenditures by fixed and random effects models. Therefore, the analytical outcomes reveal that countries are economically efficient. On the contrary, SFA estimation concludes that countries are found to be inefficient, because higher variation is exists in efficiency change compared to technological efficiency change and total factor productivity change on average. In addition, it is worth notable that healthcare and environmental expenditures improve the country's economic efficiency. Furthermore, public health is also influenced by economic efficiency. Thus, this study suggests that countries should better utilize given resources and invest a specific portion of national income in order to improve economic efficiency.

Productivity analysis of family takaful in Indonesia and Malaysia: Malmquist productivity index approach

PurposeThis study aims to investigate the productivity level of family takaful in Malaysia and Indonesia from 2014 to 2019. Productivity can support corporate sustainability, which is one of the company’s goals.Design/methodology/approachThe measurement of the productivity level in this study involved applying the Malmquist Productivity Index (MPI) method. The input variables used consisted of equity, total expenses and total investment. The output variables consisted of total profit and investment income. In addition, this research used the orientation of the output and intermediation.FindingsThroughout the study period, the Indonesian family takaful had an average total factor productivity change (TFPCH) of about 0.945. In other words, it did not reach optimal productivity. It is more due to the low value of technological change (TECHCH). On the contrary, family takaful companies in Malaysia had called productivity, showing a TFPCH of about 1.041. Again, this is mainly due to an increase in TECHCH and efficiency change, but it is still low in pure technical efficiency change.Research limitations/implicationsThis study focuses on factors that exist in internal takaful companies. Neither micro- nor macroeconomic variables that can affect productivity levels have been measured. In addition, this study only analyzed two countries out of the 11 countries in the Southeast Asian region.Practical implicationsFamily takaful companies can use the productivity index as one of the bases of evaluation in managing their resources to enhance optimal output. Furthermore, the management of family takaful companies in Indonesia needs to focus more on technological innovation and delivery of services to increase productivity. Meanwhile, family takaful companies in Malaysia can maintain their technology usage and efficiency to operate productively. The government in both countries is expected to actively accelerate the growth of family takaful companies by producing regulatory products that strengthen the industry. Specifically, the government in Indonesia needs to make regulations that support technology improvement.Originality/valueThere is still not much research that examines family takaful’s productivity level using the MPI. The MPI is an appropriate tool to evaluate the productivity of family takaful companies. Thus, family takaful companies can improve their quality by assessing the productivity index value.

Dynamic Measurement of Water Use Level Based on SBM-DEA Model and Its Matching Characteristics with Economic and Social Development: A Case Study of the Yellow River Basin, China

Enhancing the level of water use and alleviating the constraints of water shortage on economic and social development are powerful supports to realize the harmonious balance of water and economic society. In this study, the data envelopment analysis (DEA) window analysis method is applied to the study of water use level, and the SBM-DEA model (slack based measure, SBM) is combined to explore the spatial and temporal evolution characteristics of composite water use index (CWUI) in nine provinces from 2012 to 2018. The Malmquist index model is used to decompose the intrinsic causes of total factor productivity (TFP) changes, and the spatial matching degree calculation method is applied to study the matching degree between CWUI and economic and social development levels (E-SDL). The results showed that: (1) the overall trend of CWUI in the nine provinces from 2012 to 2018 was increasing, with significant spatial variability in water use levels; (2) the improvement of TFP of water in the nine provinces was mainly driven by technological change (TC), and the main factor limiting the improvement of TFP of water was technical efficiency change (EC); (3) E-SDL of the nine provinces showed an increasing trend, with the spatial distribution characteristics of decreasing E-SDL of the downstream, midstream and upstream provinces in sequence; (4) the degree of matching between CWUI and E-SDL shows strong regional differences, with different types of matching.

Changes in productivity in healthcare services in the Kingdom of Saudi Arabia

BackgroundAmid the rising demand for healthcare services in Saudi Arabia, there is a need to monitor, evaluate, and improve performance in the delivery of these services. In this regard, the aim of this study was to estimate changes in total factor productivity (TFP) in healthcare services across the health system administrative regions in Saudi Arabia from 2006 to 2018. The contributions of changes in efficiency and technology to the observed changes in TFP were further evaluated.MethodsThe data used for this study were extracted from annual Ministry of Health Statistical Yearbooks for the period of 2006–2018. TFP changes were estimated using the Malmquist Productivity Index, in which technology frontiers were constructed through data envelopment analysis. The changes in TFP were decomposed into changes in technology, changes in pure technical efficiency, and changes in scale efficiency following the Färe-Grosskopf-Norris-Zhang method. As robustness checks, we used bootstrapping to construct intervals and applied alternative decomposition methods. The changes in TFP and its sources were also compared between public and private hospitals.ResultsOver the period from 2006 to 2018, TFP for healthcare services has decreased on average by 5.6% per year solely on account of a technical regress. Public hospitals registered a higher deterioration in productivity (6.0% per year) than private hospitals (4.8% per year).ConclusionUsing the available resources, there is potential for realising gains in productivity of healthcare services by addressing existing technological challenges. Since the decline in TFP is entirely a problem of technical regress, the primary solution should focus on strategies for achieving technical progress (innovation) through investment in more or better machinery, equipment, and structures for healthcare service provision.

Environmental Regulation, Corporate Economic Performance and Spatial Technology Spillover: Evidence from China's Heavily Polluting Listed Corporations.

The relationship between environmental regulation, technology spillover, and economic performance has been the subject of intense scholarly debate in environmental economics for many years. The famous Porter hypothesis states that environmental regulation promotes both the economic performance and the environmental performance of corporations. However, the existing literature has paid relatively little attention to micro-level research and spatial spillover effects. This article endeavors to fill this gap by an empirical analysis of a sample of 900 of China’s heavily polluting listed corporations for the period of 2013–2016. By utilizing spatial econometric methods to measure spatial direct and indirect effects and decomposing total factor productivity change into technical change, pure efficiency change, and scale efficiency change, we find that environmental regulation promotes corporate total factor productivity but widens the disparity between profitable and unprofitable corporations. Our results also suggest that the direct and indirect effects of environmental regulation and corporate profitability on promoting total factor productivity rely heavily on the efficiency changes, while the contribution of the key component, technical change, is insignificant.