Impact of environmental regulation on green total factor productivity: a new perspective of green technological innovation

Abstract

Green total factor productivity (GTFP) is an essential indicator to measure economic and environmental efficiency. Moreover, formulating a reasonable environmental regulation system and promoting green technological innovation is a systematic way to improve GTFP. However, previous related studies lack to investigate the impact of environmental regulation on GTFP from the perspective of green technological innovation. For this purpose, this paper aims to examine the specific impact of environmental regulation on GTFP based on the perspective of green technology innovation, so as to provide some policy insights for the formulation of more effective implementation of environmental regulation, improve green technology innovation level, and achieve a win-win situation for both economic growth and environmental protection. Furthermore, epsilon-based measure (EBM), which includes both radial and non-radial distance functions, is used to measure the GTFP. The spatial autoregressive method is also employed to quantify the impact of environmental regulation on GTFP from the perspective of green technological innovation using panel data of 269 prefecture-level cities in China from 2004 to 2018. The main findings indicate that there is a significant spatial autocorrelation between environmental regulation and GTFP. Environmental regulation has a significant positive effect on GTFP. Environmental regulation in the local regions also significantly contributes to GTFP in neighboring regions. Besides, environmental regulation indirectly promotes GTFP by enhancing green technological innovation level. Regional heterogeneity results show that environmental regulation can not only directly promote GTFP but also indirectly significantly promote GTFP through green technological innovation in the eastern and central regions, but insignificant in the western region. Based on the above findings, we conclude that policymakers should not only develop differentiated environmental regulation standards and steadily improving the intensity and rationality of environmental regulation but also add green innovation funds supply, enhance green innovation factor allocation efficiency, and strengthen R&D talents, funds, and policies to green technology innovation, so as to drive GTFP improvement.

Keywords: Environmental regulation; Green technological innovation; Green total factor productivity; Heterogeneity effect; Spatial spillover effect.