Carbon Emission, Air Pollution, and Total Factor Productivity: Evidence from Prefecture-Level Cities in China

Abstract

Based on the instrumental variable method and the panel data of 283 prefecture-level cities in China from 2004 to 2016, we explore the relationship between carbon emission, air pollution, and total factor productivity (TFP). The results show that: (1) Both carbon emission-induced and air pollution-induced environmental regulations positively promote TFP. For every 1% increase in the two indicators of the intensity of environmental regulation, carbon emission, and air pollution, TFP will increase by 1.7150 percentage points and 0.6366 percentage points respectively. (2) Carbon emission-induced and air pollution-induced environmental regulation have similar coefficients on TFP, indicating that the effects of the two are synergistic. Carbon emission has a greater impact on TFP, so enhancing environmental regulation on carbon emission can better promote the improvement of TFP. (3) Financial scale and government intervention have a significant intermediary effect between environmental regulation in both aspects and TFP.