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

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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)

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.

Suggested Citation

  • Yanfeng Lou & Yezhuang Tian & Xueliang Tang, 2020. "Does Environmental Regulation Improve an Enterprise’s Productivity?—Evidence from China’s Carbon Reduction Policy," Sustainability, MDPI, vol. 12(17), pages 1-18, August.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:17:p:6742-:d:401484
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    References listed on IDEAS

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    Cited by:

    1. Xiaoming Song & Ze Tian & Chenhui Ding & Chao Liu & Wei Wang & Ronggai Zhao & Yingchun Xing, 2022. "Digital Economy, Environmental Regulation, and Ecological Well-Being Performance: A Provincial Panel Data Analysis from China," IJERPH, MDPI, vol. 19(18), pages 1-21, September.
    2. Weiqi Pei & Weiran Pei, 2022. "Empirical Study on the Impact of Government Environmental Subsidies on Environmental Performance of Heavily Polluting Enterprises Based on the Regulating Effect of Internal Control," IJERPH, MDPI, vol. 20(1), pages 1-17, December.

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