An Empirical Study On Industry Technical Efficiency And Total Factor Productivity Under Environmental Constraint In China's Regional Economies

Through the reform and open policy of 30 years, China's economic growth rate has reached 9.8% on average. Rapid economic growth accompanied by low utilization of natural resources, declining quality of the environment, and the increasing damage of environmental health loss (World Bank,2009). As the main of the economy, the average annual growth rate of China's industrial economy achieved 11.58%(Wu Jun,2009). Rapid industrial development inevitably produce a variety of pollution, industrial pollution is a major source of environmental pollution in China. State Environmental Protection Administration announced that China's environmental control of industrial pollution is the primary task of policy makers. Therefore, measuring industrial productivity in China under environmental considerations, and exploring the relationship between the environmental control and the industrial productivity loss have the theoretical and practical significance.This paper applies the directional distance function and Malmquist-Luenberger productivity index to measure industry technical efficiency and environmental regulation cost, TFP over the period 1998 to 2007 while accounting for environmental factors in China's regional economies. Factors associated with productivity change are investigated through dynamic generalized method of moments (GMM) estimation of panel data. The major conclusions are as follows:The eastern region has the highest technical efficiency, while the western region has the lowest environmental efficiency. The higher the technical efficiency is, the lower environmental regulation cost is. Industry TFP in China under environmental restrictions is lower than the Industry TFP which ignores the environmental factors on average. Industrial TFP growth is mainly derived from technical progress. Under environmental restrictions, the eastern region has the highest TFP growth rate, while the central region has the lowest TFP growth rate. GRP per capita, FDI, structure factor, energy structure and population density have a varying degree effect on the environment efficiency and environment TFP growth.