Environmental Decentralization and Firm TFP: Evidence from the Data of Chinese Manufacturing Enterprises

Li Qiang

Journal of Finance and Economics Vol. 43, Issue 03, pp. 133 - 封三 (2017)  DOI:10.16538/j.cnkij.fe.2017.03.011

Abstract

Under the background of current reform of environmental decentralization, it is particularly important to find out a reasonable environment regulation way to alleviate the non-harmonious relationship between environment regulation and firm TFP growth. This paper introduces environmental decentralization into the model of firm productivity growth decisions, and analyzes the effect of environmental decentralization on local firm productivity growth decisions in the monopolistic competition environment. It makes an empirical analysis and concludes that there is an inverse U-shape relationship between environmental decentralization and local firm TFP. It also makes a robustness test through the methods of sub-sample, alternative variables and empirical test and the conclusions are still very robust. Therefore, it argues that governments should increase the spending and duty scope in the central environmental affairs, and firms should improve TFP through technology innovation and avoid the effect of environment factors on firm development.

Keywords

environmental decentralization; TFP; manufacturing