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Climate policy uncertainty and firm-level total factor productivity: Evidence from China

Xiaohang Ren, Xiao Zhang, Cheng Yan and Giray Gözgör

Energy Economics, 2022, vol. 113, issue C

Abstract: Using 2605 Chinese A-share listed companies in the mining, manufacturing, and energy production and supply sectors from 2009 to 2020, we examine the relationship between climate policy uncertainty (CPU) and firm-level total factor productivity (TFP). The main findings are as follows: First, CPU significantly reduces firm-level TFP, with a greater impact on low-productivity firms than on high-productivity firms; second, the negative effect of CPU on firm-level TFP is most pronounced for non-state-owned, labor-intensive, and capital-intensive companies; third, CPU hinders research and development investment and reduces the amount of free cash flow. These results indicate that CPU exerts negative impacts on firm-level TFP mainly via its effects on the capital status of the companies. Our findings remain valid after a series of robustness tests and controlling for endogeneity. The government should introduce forward-looking climate policies to reduce the negative impact of policy uncertainty.

Keywords: Climate policy uncertainty; Climate change; Total factor productivity; China (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.eneco.2022.106209

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Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

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