The neighborhood effects of environmental regulation and total factor productivity growth: Insights from a spatial econometric approach

This paper explores the impact of environmental regulation on total factor productivity growth, from the perspective of a spatial econometric approach. The empirical findings are: (1) TFP growth increased slightly over the years for 1992-2008 in China, depending mainly on the technical change. (2) Spatial dependence and the productivity growth effect are statistically significant and positive. (3) Local environmental regulation has a positive impact on TFP growth, confirming the “Porter Hypothesis”. However, the neighboring environmental regulatory has a negative effect on the local TFP growth, and moreover, the development of the provinces are more susceptible to regulatory effort neighboring geographic-based weight than that of income-based weight.(4)There is little evidence supportive of an environmental “Race to Bottom” in Chinese provincial environmental regulation during the sample periods.