A Study On The Impact Of Environmental Regulation To Total Factor Productivity Of China’s Industrial Enterprises

Through the development of reform and opening up during the past thirty years, China’s economy has achieved remarkable achievements. However, China endures the costs of resources and environment, and issues involving environment resources are also increasing at the same time. Faced with the grim environmental situation, the China’s government has actively adopted various environmental regulations means to preventing and controlling environmental pollution. Nevertheless, China faces trade-offs between environmental protection and economic development, industrial pollution prevention and production efficiency improvement because economic development is still the top priority for China for current. In this context, how to explore the environmental regulation and the performance of China’s industrial enterprises from the microscopic perspective from the impact of environmental regulation on enterprise total factor productivity has become a key issue.The impact of environmental regulation to China’s industrial enterprises total factor productivity is studied by the paper with qualitative and quantitative analysis methods from various angles. First, the connotation of environmental regulation and enterprises total factor productivity are defined and related literatures are summarized. Two main views on the relationship between them are found, which are the Neoclassical economics’"suppression hypothesis" and the Porter Hypothesis’s "promoting hypothesis". Second, comprehensive index is used to measure environmental regulations and ordinary least squares, fixed effects method and Levinsohn-Petrin method are used to measure the China’s industrial enterprises total factor productivity from 2001 to 2007.Then, the paper analyzes them statistically in order to define the current situations and characteristics of environmental regulation and total factor productivity that China’s industrial enterprises are facing. Finally, regression analysis is taken between environmental regulation and China’s industrial enterprises total factor productivity only considering environmental regulation, and integrated enterprise size and industry heterogeneity in turn. The results shows that:first, environmental regulation plays a catalytic role on China’s industrial enterprises total factor productivity on the whole, but they have inverted "U-shaped" relationship, while the majority of China’s enterprises in the left of inverted "U-shaped" curve stagnation; second, to expand the scale of enterprises further promotes the active role of environmental regulation on China’s industrial enterprises total factor productivity; third, based on industry heterogeneity, without considering the enterprise scale, the improvement of environmental regulation played a descending active role on light, moderate and severe pollution industrial enterprises total factor productivity successively, and the gap is great; when considering the enterprise scale, the expansion of scale makes environmental regulation better to promote enterprises total factor productivity, but this effect in moderate and severe pollution industrial enterprises is obvious but not obvious in light pollution ones. Fourth, enterprise research and development costs, the capital-labor ratio, export activity and profit rate also play a catalytic role on China’s industrial enterprises total factor productivity, but firm age and enterprise total factor productivity have "U-shaped" relationship.