IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i18p8085-d1479019.html
   My bibliography  Save this article

Impact of Foreign Direct Investment on Green Total Factor Productivity: New Evidence from Yangtze River Delta in China

Author

Listed:
  • Shuai Chen

    (School of Business, Jinling Institute of Technology, Nanjing 211169, China)

  • Jiameng Yang

    (College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China)

  • Xue Chen

    (Business School, University of Shanghai for Science and Technology, Shanghai 200093, China)

Abstract

China has entered a period of high-quality development. As an important feature of high-quality development, green total factor productivity (GTFP) has attracted much attention. With the opening-up and economic globalization, the Yangtze River Delta, one of the strongest and most technological regions in China, has been attracting an increasing amount of foreign direct investment (FDI). This study investigates if FDI is conducive to GTFP under the constraints of specific resources and a specific environment, which has important practical significance for the utilization of FDI in the Yangtze River Delta and China. Through a literature review and sorting the current FDI in the Yangtze River Delta, the GTFP and its decomposition indicators of 27 cities from 2004 to 2019 are calculated based on their energy consumption and pollution. Using the fixed-effects model and threshold model of panel data, this study tests whether FDI promotes GTFP and whether a nonlinear impact of FDI on GTFP exists. It finds that (1) the GTFP of most cities in the Yangtze River Delta improved during the sample period, but their annual growth declined. Technology is the dominant factor affecting the growth of GTFP. (2) FDI in the Yangtze River Delta has increased, and the investment structure has improved, but the distribution among cities is uneven. (3) The scale and quality of FDI have a positive impact on GTFP, which supports the “Pollution Halo” hypothesis. Economics, education, networks, and trade openness can promote the growth of GTFP, while environmental regulation, government intervention, and industrialization have a negative impact. (4) The quality of FDI, economics, the industrial structure, the environmental regulation, and the internet are each a significant single threshold characteristic for the impact of FDI on GTFP. When one of these factors is lower than a certain threshold, FDI has less impact on GTFP. When one exceeds a certain threshold, FDI’s positive promotion effect on GTFP significantly improves. Based on the analysis, this study offers some suggestions. The government should improve the FDI selection mechanism based on realities, make appropriate environmental regulatory policies, strengthen the construction of networks, and improve the “Internet+” effect on productivity.

Suggested Citation

  • Shuai Chen & Jiameng Yang & Xue Chen, 2024. "Impact of Foreign Direct Investment on Green Total Factor Productivity: New Evidence from Yangtze River Delta in China," Sustainability, MDPI, vol. 16(18), pages 1-24, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:18:p:8085-:d:1479019
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/18/8085/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/18/8085/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Antzoulatos, Angelos A., 1996. "Consumer credit and consumption forecasts," International Journal of Forecasting, Elsevier, vol. 12(4), pages 439-453, December.
    2. John Y. Campbell & Sanford J. Grossman & Jiang Wang, 1993. "Trading Volume and Serial Correlation in Stock Returns," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 905-939.
    3. Timo Kuosmanen, 2005. "Weak Disposability in Nonparametric Production Analysis with Undesirable Outputs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1077-1082.
    4. Jeffrey M. Bacidore & John A. Boquist & Todd T. Milbourn & Anjan V. Thakor, 1997. "The Search for the Best Financial Performance Measure," Financial Analysts Journal, Taylor & Francis Journals, vol. 53(3), pages 11-20, May.
    5. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    6. Cai, Xiqian & Lu, Yi & Wu, Mingqin & Yu, Linhui, 2016. "Does environmental regulation drive away inbound foreign direct investment? Evidence from a quasi-natural experiment in China," Journal of Development Economics, Elsevier, vol. 123(C), pages 73-85.
    7. Alford, Aw, 1992. "The Effect Of The Set Of Comparable Firms On The Accuracy Of The Price Earnings Valuation Method," Journal of Accounting Research, Wiley Blackwell, vol. 30(1), pages 94-108.
    8. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    9. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0, October.
    10. Lishi Zeng & Xuemei Jiang, 2023. "ESG and Corporate Performance: Evidence from Agriculture and Forestry Listed Companies," Sustainability, MDPI, vol. 15(8), pages 1-18, April.
    11. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1.
    12. Ahmed, Elsadig Musa, 2012. "Are the FDI inflow spillover effects on Malaysia's economic growth input driven?," Economic Modelling, Elsevier, vol. 29(4), pages 1498-1504.
    13. Jeffrey Kukulski & Michael Ryan, 2011. "Investment History and Market Orientation Effects in the TFP–FDI Relationship," The World Economy, Wiley Blackwell, vol. 34(4), pages 546-567, April.
    14. Bruce Domazlicky & William Weber, 2004. "Does Environmental Protection Lead to Slower Productivity Growth in the Chemical Industry?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(3), pages 301-324, July.
    15. Moses Abramovitz, 1956. "Resource and Output Trends in the United States since 1870," NBER Chapters, in: Resource and Output Trends in the United States since 1870, pages 1-23, National Bureau of Economic Research, Inc.
    16. Wang, Nannan & Chang, Yen-Chiang, 2014. "The development of policy instruments in supporting low-carbon governance in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 35(C), pages 126-135.
    17. Abdouli, Mohamed & Hammami, Sami, 2017. "Investigating the causality links between environmental quality, foreign direct investment and economic growth in MENA countries," International Business Review, Elsevier, vol. 26(2), pages 264-278.
    18. Färe, R. & Grosskopf, S. & Fukuyama, H. & Margaritis, D., 2011. "DEA and endogenous technological change," European Journal of Operational Research, Elsevier, vol. 210(2), pages 457-458, April.
    19. Tone, Kaoru, 2001. "A slacks-based measure of efficiency in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 130(3), pages 498-509, May.
    20. De Bondt, Werner F M & Thaler, Richard H, 1987. "Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, vol. 42(3), pages 557-581, July.
    21. Orlic, Edvard & Hashi, Iraj & Hisarciklilar, Mehtap, 2018. "Cross sectoral FDI spillovers and their impact on manufacturing productivity," International Business Review, Elsevier, vol. 27(4), pages 777-796.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shuai Chen & Jiameng Yang & Xinyi Kang, 2023. "Effect of Fiscal Expenditure for Supporting Agriculture on Agricultural Economic Efficiency in Central China—A Case Study of Henan Province," Agriculture, MDPI, vol. 13(4), pages 1-22, April.
    2. Kox, Henk L.M. & Leeuwen, George van & Wiel, Henry van der, 2010. "Competitive, but too small - productivity and entry-exit determinants in European business services," MPRA Paper 24389, University Library of Munich, Germany.
    3. Matthias Firgo & Peter Mayerhofer, 2015. "Wissens-Spillovers und regionale Entwicklung - welche strukturpolitische Ausrichtung optimiert des Wachstum?," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 144, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
    4. Jan Fagerberg, 1999. "Technology, Policy, Growth - Theory, Evidence and Interpretation," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 25, pages 5-14.
    5. Matthias Firgo & Peter Mayerhofer, 2015. "Wissensintensive Unternehmensdienste, Wissens-Spillovers und regionales Wachstum. Teilprojekt 1: Wissens-Spillovers und regionale Entwicklung – Welche strukturpolitische Ausrichtung optimiert das Wach," WIFO Studies, WIFO, number 58342.
    6. Godin, Benoit, 2004. "The New Economy: what the concept owes to the OECD," Research Policy, Elsevier, vol. 33(5), pages 679-690, July.
    7. Shihong Zeng & Ya Zhou, 2021. "Foreign Direct Investment’s Impact on China’s Economic Growth, Technological Innovation and Pollution," IJERPH, MDPI, vol. 18(6), pages 1-24, March.
    8. Huang, Junbing & Cai, Xiaochen & Huang, Shuo & Tian, Sen & Lei, Hongyan, 2019. "Technological factors and total factor productivity in China: Evidence based on a panel threshold model," China Economic Review, Elsevier, vol. 54(C), pages 271-285.
    9. Kun Lv & Shurong Yu & Dian Fu & Jingwen Wang & Chencheng Wang & Junbai Pan, 2022. "The Impact of Financial Development and Green Finance on Regional Energy Intensity: New Evidence from 30 Chinese Provinces," Sustainability, MDPI, vol. 14(15), pages 1-29, July.
    10. Moe, Espen, 2010. "Energy, industry and politics: Energy, vested interests, and long-term economic growth and development," Energy, Elsevier, vol. 35(4), pages 1730-1740.
    11. Wei Wei & Qiao Fan & Aijun Guo, 2022. "China’s Industrial TFPs at the Prefectural Level and the Law of Their Spatial–Temporal Evolution," Sustainability, MDPI, vol. 15(1), pages 1-21, December.
    12. Miao Zhang & Rui Yang, 2022. "FDI and spillovers: New evidence from Malaysia’s manufacturing sector," Review of Development Economics, Wiley Blackwell, vol. 26(2), pages 847-877, May.
    13. Danny Cyra Yangchen & Mingyong Hong & Qisong Yang, 2022. "The Effect of Farmland Transfer on the Technical Efficiency of Farm Households in China: An Empirical Result of External Environmental Factors," Land, MDPI, vol. 12(1), pages 1-22, December.
    14. García, Francisco & Jin, Byungchae & Salomon, Robert, 2013. "Does inward foreign direct investment improve the innovative performance of local firms?," Research Policy, Elsevier, vol. 42(1), pages 231-244.
    15. Pal, Shreya & Mahalik, Mantu Kumar & Zhao, Qiuyun & Liu, Fan & Soliman, Alaa M., 2024. "Boosting productive capacity in OECD countries: Unveiling the roles of geopolitical risk and globalization," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    16. Rahim KIA LASHAKI & Elsadig Musa AHMED, 2017. "FDI Inflow Spillover Effect Implications On The Asia Pacific Productivity Growth Through The Export Channel," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 26(3), pages 57-72.
    17. Fagerberg, Jan, 1988. "Technology, Growth and Trade: Schumpeterian Perspectives," MPRA Paper 59156, University Library of Munich, Germany.
    18. Jože P. Damijan & Mark Knell, 2005. "How Important Is Trade and Foreign Ownership in Closing the Technology Gap? Evidence from Estonia and Slovenia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(2), pages 271-295, July.
    19. Jan Fagerberg & Bengt-Åke Lundvall & Martin Srholec, 2018. "Global Value Chains, National Innovation Systems and Economic Development," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 30(3), pages 533-556, July.
    20. Iamsiraroj, Sasi, 2016. "The foreign direct investment–economic growth nexus," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 116-133.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:18:p:8085-:d:1479019. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.