Does Environmental Regulation Improve an Enterprise’s Productivity?—Evidence from China’s Carbon Reduction Policy

Yanfeng Lou, Yezhuang Tian and Xueliang Tang
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Yanfeng Lou: School of Management, Harbin Institute of Technology, Harbin 150001, China
Yezhuang Tian: School of Management, Harbin Institute of Technology, Harbin 150001, China
Xueliang Tang: Business School, Yangzhou University, Yangzhou 225009, China

Sustainability, 2020, vol. 12, issue 17, 1-18

Abstract: Theoretical research finds that environmental regulation has both positive and negative effects on enterprise productivity. Based on the Energy Conservation and Carbon Reduction policy implemented by the Chinese government, this study empirically analyzed the policy treatment level boundary condition of the positive and negative effects that dominated and its moderating factors. The generalized propensity score matching model (GPSM) was used to analyze the net effect of the policy on the total factor productivity (TFP) of Chinese manufacturing enterprises. The results showed that: (1) the low treatment level of the policy can promote the growth of the enterprises’ TFP; (2) in contrast, the treatment level of the policy exceeded a certain threshold, which gradually led to an inhibitory effect on the enterprises’ TFP; (3) the mechanism used to enforce the policy caused the enterprises to innovate, which enhanced their TFP, but took time to gradually release; (4) the enterprises with a stronger capacity for innovation or a larger size found it easier to transform the pressure from the policy into an innovative impetus to improve their TFP; (5) however, the government subsidies distorted the forced-innovation effect of the policy on the enterprises’ innovation, which restrained the positive effect of the policy on the TFP.

Keywords: Environmental Regulation; Productivity; Chinese Manufacturing Enterprises; GPSM (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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