Journal
ENERGY POLICY
Volume 152, Issue -, Pages -Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2021.112231
Keywords
Misallocation model; Total factor productivity; Cleaner production standards; Difference-in-differences; Energy firms
Funding
- National Natural Science Foundation of China [71773028]
- National Social Science Fund of China [17BJY075]
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This study examines the impact of regulatory policy on total factor productivity (TFP) at both firm and industry levels, using a theoretical model and the difference-in-differences method. Empirical results suggest that while cleaner production standards may reduce resource allocation efficiency, they can increase firms' TFP, especially for small and state-owned firms. Policy evaluation should consider changes in TFP and resource allocation simultaneously.
Based on a theoretical model, this study reveals that regulatory policy can impact two different types of total factor productivity (TFP) at both the firm and industry levels, namely the true/distorted TFP, calculated by the observed and distorted data, and the counterfactual/undistorted TFP, after correcting distortions. Then, using the difference-in-differences method, we investigate the impact of cleaner production standards on Chinese energy firms' TFP and resource allocation efficiency over the period of 2000-2007. The empirical results show that when resources are fully and effectively allocated, the distorted TFP of China's energy industry can be increased by 117%-491.6%. Although the regulations of cleaner production reduce the efficiency of resource allocation in the energy industry, it enhances two levels of firms' TFP. Heterogeneity analysis shows that these policies have a stronger impact on small and state-owned firms. This study suggests that policy evaluation should combine the changes in two levels of TFP and resource allocation.
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