The impact of environmental constraint on China’s industrial productivity growth: An empirical study based on an directional environmental production model 1

TU Zhengge and XIAO Geng

Professor, College of Economics, Huazhong Normal University

Research Fellow with Tsinghua-Brookings Research Center

Abstract:

Using input, output and pollution data of industrial enterprises in 30 Chinese provinces and municipalities from 1998 to 2005, this paper creates an environmental production frontier function model to assess China’s industrial growth sources, particularly environmental control and changes in the industrial environmental structure’s impact on industrial productivity. It found that (1) at its current stage, China’s rapid industrial growth is accompanied by a slow increase in pollution; (2) environmental total factor productivity has become a primary driver of rapid growth with less pollution; (3) environmental control didn’t cause any substantial restraint on China’s industrial growth; (4) improvement in industrial environmental structure contributes an increasingly large share to economic growth with less pollution. China’s industrial productivity is increasing, its growth model is being transformed, and the environment is exerting a diminishing constraint on economic growth.

Key word: environmental total factor productivity, directional environmental production function, industrial environmental structure

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