A Research On The Effects Of FDI And Environmental Regulation To Environmental Total Factor Productivity

China’s economy has developed rapidly,and the scale and growth rate of the economy have been among the highest in the world.However,the status of our environment is gradually deteriorating,it is seriously affecting China’s economy.It is crucial for China to transform the economy.While considering the issue of economic growth,we shouldn’t neglect environmental issues.In this context,Environmental Total Factor Productivity emerged as the times require,and it has become an important indicator for researching the coordinated development of economic and environment.In this paper,environmental pollution is included as non-expected output in total factor productivity.Based on SBM function and Malmquist-Luenberger index,we measured Environmental Total Factor Productivity in 30 Provinces of China,and we decomposed it into Technological Change and Efficiency Change.Next,we analyzing the regional differences in Environmental Total Factor Productivity in China.In order to further analyze the Environmental Total Factor Productivity,this paper summarizes the previous research and the status quo,and finds that foreign direct investment(FDI)and environmental regulation have important influence on the economy and the environment.Based on the theoretical mechanism,the following three hypotheses are proposed: First,FDI has an impact on Environmental Total Factor Productivity,but it is uncertain of the direction of influence;Secondly,environmental regulation has an impact on ETFP,but the direction of influence has not yet been determined;Thirdly,FDI and environmental regulation interact to act on ETFP.On this basis,the paper establishes an equation model,which uses the national panel data,sub-regional panel data and panel data of different FDI to conduct empirical analysis to explore environmental regulations,FDI and how they relate to each other to affect environmental total factor productivity.The main conclusions are as follows:(1)Overall,FDI can significantly promote the improvement of Environmental Total Factor Productivity.However,this effect has regional heterogeneity.In the eastern and western region,FDI can significantly promote the improvement of ETFP,while in the central region,FDI cannot improve Environmental Total Factor Productivity.Different sources of FDI have different effects on ETFP.FDI from Hong Kong,Japan,the US,South Korea and German can significantly improve the ETFP.Hong Kong has the greatest contribution to the promotion of ETFP,followed by the United States,and the FDI from Germany,Japan,Korea have less effect on the promotion of ETFP.(2)Strengthen the level of environmental regulation.From the national sample,the lag of environmental regulation has significantly promoted the ETFP.In different regions,the environmental regulation is also promoting ETFP.(3)In general,China’s FDI and environmental regulation have formed a good interaction,which can significantly improve the ETFP.In the eastern and western region,the interaction can significantly promote the improvement of ETFP.The influence of interaction items in the central region on ETFP is not significant,and FDI in the central region has not yet formed a positive interaction with environmental regulation.FDI from the five source countries and regions can form a good interaction with environmental regulation and promote the improvement of Environmental Total Factor Productivity.According to the comprehensive research of this paper,it is proposed to optimize the FDI regional structure and industrial structure,and comprehensively consider FDI from different sources.We also should pay attention to environmental regulations.