Environmental Protection Tax Reform in China: A Catalyst or a Barrier to Total Factor Productivity? An Analysis through a Quasi-Natural Experiment

Jingjing Wang, Yuhan Pan () and Decai Tang ()
Additional contact information
Jingjing Wang: School of Law and Business, Sanjiang University, Nanjing 210012, China
Yuhan Pan: School of Management Science and Engineering, Nanjing University of Information Science & Technology, Nanjing 210044, China
Decai Tang: School of Management Science and Engineering, Nanjing University of Information Science & Technology, Nanjing 210044, China

Sustainability, 2024, vol. 16, issue 16, 1-20

Abstract: China’s 2018 environmental protection tax (EPT) reform was introduced in response to increasing concerns about environmental degradation. It aimed to use fiscal policy to enhance environmental governance while fostering economic productivity. This study employs a difference-in-differences approach to analyze panel data from publicly listed companies between 2009 and 2019. It examines the reform’s influence on total factor productivity (TFP) in pollution-intensive industries, addressing both environmental and economic objectives. The results reveal that the tax reform significantly enhances TFP, acting as a robust catalyst for economic growth rather than a barrier. This effect is particularly strong in state-owned enterprises and those with less-severe financing constraints. Mechanism analysis indicates that the reform boosts TFP through the promotion of green innovations and alleviation of financing constraints. These findings provide empirical evidence at the micro-level of the reform’s efficacy in promoting sustainable business practices. The study offers insights for future environmental tax policies in China and underscores the necessity of aligning environmental and economic strategies to achieve sustainable development.

Keywords: environmental protection tax reform; total factor productivity; difference-in-differences approach; green innovation; financing constraints (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/16/16/6712/pdf (application/pdf)
https://www.mdpi.com/2071-1050/16/16/6712/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:16:y:2024:i:16:p:6712-:d:1450610

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().