Do Foreign Direct Investment Inflows in the Producer Service Sector Promote Green Total Factor Productivity? Evidence from China

Abstract

By exploring feasible pathways for coordinating the ecological environment and economic development, this study investigated the impact of FDI in the producer service sector (SFDI) on green total factor productivity (GTFP) across 20 provinces from 2006 to 2019 in China. We employed a panel data regression model and found that SFDI significantly promotes China’s GTFP, verifying the existence of the “pollution halo” effects of SFDI in China, where GTFP is estimated by the global Malmquist–Luenberger productivity index based on the slack-based measure and directional distance function. We also employed mediating and moderating models to test the mechanism and found that SFDI can affect GTFP through competition, green innovation, and resource allocation mechanisms. Notably, the impact of SFDI on GTFP exhibits regional heterogeneity, with the strongest impact observed in the eastern region, followed by the western region, and the weakest in the central region. Further analysis reveals that the enhancement of environmental regulations and the level of factor marketization can amplify the influence of SFDI. Finally, we offer specific recommendations encompassing the enhancement of openness, improvement of factor markets, and strengthening of environmental regulations.