Does Environmental Regulation Improve the Green Total Factor Productivity of Chinese Cities? A Threshold Effect Analysis Based on the Economic Development Level

Abstract

Improvement of green total factor productivity (GTFP) through environmental regulation is of great practical significance in promoting the high-quality development of urban economies. Based on panel data for 163 cities in China from 2003 to 2016, five indicators were selected to quantify the effects of environmental regulation: the SO2 removal rate, smoke and dust removal rate, solid waste utilization rate, domestic sewage treatment rate, and waste harmless treatment rate. This study evaluated the impact of environmental regulation on urban GTFP, and analyzed the threshold effect of urban economic development levels. The research results showed that the impact of environmental regulations on GTFP changed as the level of urban economic development increases. When the economic development level was low, environmental regulation had a significant positive effect on GTFP, especially the SO2 removal rate. When the economy developed to reach a medium level, the impact of environmental regulation on GTFP was negative. When the economic development level was high, the SO2 removal rate still had a significant positive impact on GTFP. The solid waste utilization rate had a significant negative impact on GTFP. It was concluded that the government should consider the local economic development level when formulating environmental regulation policies.