Spatial externalities, environmental pollution and total factor productivity growth in China — Evidence from a spatial panel data set of provincial-level

By employing a spatial panel data set of provincial-level data for the years 1992-2008 periods in China, we seek to shed light on this topic by the linkage of the productivity of economic growth and environmental pollution and its impact of spatial dependence. For this purpose we calculate in a step the efficiency and productivity via DEA-Malmquist. In a second step we regress the derived values against environmental pollution and its spatial externalities via Spatial Panel Data Model. The findings firstly provide a fairly remarkable confirmation that environmental emissions have a negative effect on TFP growth, supporting the Porter Hypothesis. Secondly, a 1% change in unobserved neighbourhood shocks will follow a 0.4239% spatial pattern of TFP growth during the years for 1992-2008. What is more, the spatial dependence for changes for TFP growth was twice in the years for 2000-2008 periods than 1992-1999 periods.