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Impacts of environmental regulation on firm productivity: evidence from China’s Top 1000 Energy-Consuming Enterprises Program

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  • Hongshan Ai
  • Yang Hu
  • Ke Li

Abstract

Regulatory environmental policy is crucial for energy conservation and emission reduction. However, no consensus is available on its impact on enterprises’ total factor productivity (TFP). This study took 6631 chemical enterprises as examples to investigate the impacts of the Top 1000 Energy-Consuming Enterprises Program (T1000P) on enterprises’ productivity. The empirical results from the difference-in-differences method indicate that the T1000P hinders TFP improvement. Specifically, the TFP change rate of enterprises affected by the T1000P decreased by 0.9230% annually. Mechanism analysis shows that the impact of T1000P includes increasing business costs, and reducing the profits of regulated companies. By checking the ‘compensation effect’ and ‘crowding out effect’ of the T1000P on enterprises’ technological progress, we prove that the T1000P had negative impacts on technological innovation and reduced the enterprises’ productivity. Therefore, the environmental regulations should be implemented based on industry characteristics and develop differentiated strategies to avoid excessive interference with the enterprises’ production decisions.

Suggested Citation

  • Hongshan Ai & Yang Hu & Ke Li, 2021. "Impacts of environmental regulation on firm productivity: evidence from China’s Top 1000 Energy-Consuming Enterprises Program," Applied Economics, Taylor & Francis Journals, vol. 53(7), pages 830-844, February.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:7:p:830-844
    DOI: 10.1080/00036846.2020.1815642
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    Cited by:

    1. Shi, Xunpeng & Tian, Binbin & Yang, Longjian & Yu, Jian & Zhou, Siyang, 2023. "How do regulatory environmental policies perform? A case study of China's Top-10,000 enterprises energy-saving program," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).
    2. Zhong Wang & Mingyu Wu & Shixiang Li & Changji Wang, 2021. "The Effect Evaluation of China’s Energy-Consuming Right Trading Policy: Empirical Analysis Based on PSM-DID," Sustainability, MDPI, vol. 13(21), pages 1-16, October.
    3. Xie, Tingting & Yuan, Ye, 2023. "Go with the wind: Spatial impacts of environmental regulations on economic activities in China," Journal of Development Economics, Elsevier, vol. 164(C).
    4. Du, Minzhe & Liu, Yunxiao & Wang, Bing & Lee, Myunghun & Zhang, Ning, 2021. "The sources of regulated productivity in Chinese power plants: An estimation of the restricted cost function combined with DEA approach," Energy Economics, Elsevier, vol. 100(C).
    5. Wen, Huwei & Wen, Changyong & Lee, Chien-Chiang, 2022. "Impact of digitalization and environmental regulation on total factor productivity," Information Economics and Policy, Elsevier, vol. 61(C).

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