Economic Policy Uncertainty, Outward Foreign Direct Investments, and Green Total Factor Productivity: Evidence from Firm-Level Data in China

This paper uses Chinese firm-level data to investigate the effect of China's outward foreign direct investment (OFDI) on green total factor productivity (GTFP) under economic policy uncertainties (EPU). We found a significant positive impact of OFDI on GTFP. Moreover, an increase in EPU was shown to decrease GTFP. We also found that OFDI positively contributes to GTFP for private firms and foreign-invested firms in China. Technology-seeking OFDI contributes greater to GTFP than resource-seeking OFDI and market-seeking OFDI. These results remain robust when considering OFDI from firms in Central and East China as well as Western China. The findings are also robust with green labor productivity (GLP) substituting for GTFP using different econometric techniques. We also discuss potential implications in enhancing green innovation performance and sustainable industrial development in China.

Automated summary

This study found a significant positive impact of Chinese firms' outward foreign direct investment on green total factor productivity, while economic policy uncertainties decrease green total factor productivity. Technology-seeking OFDI contributes more to green total factor productivity, and these results are robust across different regions and econometric techniques.