Economic growth targets and green total factor productivity: evidence from China

Abstract

This study explores the impact of economic growth targets on green total factor productivity (GTFP) based on a panel Tobit model and two manual datasets of 30 Chinese provinces from 2002 to 2019. We find that economic growth targets significantly inhibit GTFP, which is more pronounced in provinces that have high incentives when setting targets, use hard constraints when announcing targets, and fulfill their targets. In addition, we find that economic growth targets inhibit GTFP by undermining economic efficiency and aggravating environmental pollution. Moreover, the command-controlled environmental regulations weaken the inhibitory effect on GTFP, while market-motivated environmental regulations aggravate this inhibitory effect. Our findings confirm that the promotion assessment system based on economic performance leads to the irrationality of local governments in establishing economic growth targets, and the local governments pursue economic growth at the cost of development quality and sustainability.

Keywords:

• economic growth targets
• GTFP
• development quality
• sustainability

Disclosure statement

The authors declare that they have no conflict of interest.

Notes

Supplemental data

Supplemental data for this article can be accessed here.

Notes

1 The core of Chinese decentralization is the close integration of economic decentralization and a vertical political governance system. One of the most crucial aspects of economic decentralization is the discretionary power given to local governments to regulate and intervene in local development with administrative, fiscal, and financial instruments (Mookherjee 2010). In the meantime, China has a centralized political system, which is well reflected in the top-down appointment mechanism.

2 To verify the effect of economic growth targets on environmental pollution, we adopt a fixed-effect model for estimation because the explanatory variables do not have truncation characteristics.

Additional information

Funding

This work was supported by the National Social Science Fund of China [grant number 20BJY012].