An Empirical Study on Environmental Regulatory Costs & Environmental TFP

Li Xiaosheng (李小胜)1 and An Qingxian (安庆贤)2
1School of Statistics and Applied Mathematics, Anhui University of Finance and Economics, Bengbu, China
2School of Management, University of Science and Technology of China, Hefei, China

 
Abstract: This paper examines the cost of environmental regulation and the environmental total factor productivity (TFP) with directional distance function and the Malmquist-Luenberger (ML) index respectively, using inputs and output data of 36 two-digit industries over the period 1998- 2010. It finds that Chinese industries incur a relatively high environmental regulatory cost and that China has paid a high price fulfilling its promise to emissions mitigation. A comparison between conventional and environmental TFP shows that the two indicators for all industries declined on average, but a hypothesis test reveals insignificant difference between the two. In addition, the rise in environmental TFP is mainly due to technological progress, which is consistent with findings of many researches; analysis demonstrates signs of absolute convergence of environmental TFP.
Keywords: Directional distance function, environmental regulatory costs, environmentally sensitive productivity

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